Owning a home is a fantastic feeling that almost everyone strives to achieve, but is it for everyone, and what are the costs involved? Even if you already own a home, at some point you may need to sell the home either for a new home or to move into a shared living arrangement such as an apartment. In either situation, it is important to know the financial consequences and benefits.
Let’s begin with a common misconception, “Owning a home is too expensive and there’s no way I could afford it.” While homeownership does have additional costs associated with it compared to renting an apartment, the total expense isn’t always more (especially in areas where apartments are in high demand such as a college town or a densely-populated downtown). Some of the main costs associated with purchasing and maintaining a home are the down payment, the mortgage, property taxes, homeowner’s insurance, HOA fees (if applicable), and occasional repairs or renovations. While this seems like a long list of expenses, there a few things to keep in mind. Depending on where the house is located, property taxes may not be expensive. It is also not uncommon to have a mortgage payment that is less than the monthly cost of renting an apartment. To help save on mortgage costs, a larger down payment will reduce the loan amount and likely provide you with a more favorable interest rate. Homeownership also comes with tax benefits such as the ability to deduct mortgage interest and property taxes! Another tip for saving money while owning a house is to bundle your homeowner’s insurance with your auto insurance as carriers tend to provide discounts for doing so.
Owning a home has tremendous benefits over renting an apartment (especially ditching the shared walls with noisy neighbors). Along with the tax benefits, the homeowner builds equity in the home through mortgage payments, whereas an apartment tenant doesn’t have ownership of the property and therefore can’t count the property as an asset. In most cases, a home is an appreciating asset, especially over the long run, which increases your net worth. Homeownership is best for individuals who are seeking to live in the house for the long term and wish to add this valuable asset to their net worth. It is important to calculate and understand all the expenses involved and to ensure your financial situation has room for a house purchase. In contrast, renting an apartment is usually more beneficial for those seeking short-term living situations and don’t yet have enough funds set aside for a down payment.
The majority of our clients (including Lockheed Martin employees) own a home and therefore our team of Lockheed Martin Retirement Specialists is aware of the finances involved. We can also show you how a home impacts the net worth statement and where on the tax return you can find certain home expenses. As mentioned earlier, homeownership typically has a positive effect on an individual’s finances, and we will be glad to assist you in strengthening your situation with our comprehensive approach to financial planning and investment management. We look forward to connecting with you!
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Be sure and check back next week for more incredibly valuable information. Cheers!
Financial Planning and Investment Advisory offered by SWMG, LLC a Registered Investment Advisor.
Lockheed Martin Retirement Specialist is not an official title or professional designation nor is it conferred by Lockheed Martin on any individual or company.
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SMWG, LLC is not affiliated with or endorsed by Lockheed Martin Corporation. Our expertise comes from working with LMT employees for several years and helping them to retire with confidence.
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