Benefits of Owning a Home: Why Homeownership Is Worth It

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When it comes to a preference between renting a home and owning one, owning wins hands down. A 2024 LendingTree survey found that 93% of Americans believe homeownership is part of the American Dream, and 83% would rather own than rent. That’s not surprising, considering the many benefits homeownership provides.

Building Equity

Equity is the portion of your home’s value that you own outright. Every dollar of equity represents a dollar of wealth, and the longer you own your home, the faster that wealth accumulates.

Part of the reason is the way lenders apply mortgage payments to loan interest and principal, which is the amount you borrow. While almost all of your first mortgage payment goes toward interest, each subsequent payment pays slightly less interest and slightly more principal.

Appreciating home prices also increases equity. Appreciation, like loan repayment, happens over several years, which underscores the importance of looking at homeownership as a long-term strategy for building wealth.

The difference between renting and owning is staggering in that regard. Whereas homeowners have a median net worth of almost $400,000, the median for renters is just $10,400, according to “From Rent to Riches?,” a 2024 report from the Aspen Institute.

Stability and Predictability

One of the challenges of renting a home is that rent payments can increase over time, effectively pricing tenants out of their homes. In addition to being a major financial burden, the impact on tenants’ sense of stability can also take an emotional toll.

Although certain types of mortgage loans have the potential to wreak the same type of havoc, the most common loan, the 30-year fixed-rate mortgage loan, eliminates that risk by providing a consistent payment every month over the entire life of the loan. The last payment is the same as the first one, and it always pays off the loan in full.

Tax Benefits

Homeownership can provide tax benefits for homeowners who itemize their tax deductions rather than take the standard deduction.

Mortgage Interest Deduction

The first deduction is for mortgage interest on a loan used to buy or build a home. Deductible interest includes any mortgage points — prepaid interest — you pay at closing as well as the interest portion of your mortgage payments.

The deduction is limited to interest on up to $750,000 in mortgage debt, but considering that the average mortgage loan was about $410,000 in October 2024, per Mortgage Bankers Association estimates, the limit doesn’t affect most homeowners.

Property Tax Deduction

Homeowners pay property taxes imposed by the state, county and sometimes municipality where their home is located. Although tax rates vary by location and tax amounts depend on home value, homeowners paid a median $3,018 in property tax on single-family homes last year, according to the CoreLogic National Home Price Index. As long as the state and local tax you pay is based on the home’s value and is imposed on all similar real estate, you can deduct it as an itemized deduction.

Creative Control and Personalization

One of the intangible benefits of homeownership is that you can either build exactly the home you want or buy a pre-existing home and remodel it to suit your tastes. Any change that conforms to building codes and other local regulations is within your rights to make.

Potential for Home Value Growth

A home is an asset that can appreciate over time. While past appreciation has no bearing on what prices will do in the future, it’s notable that since 1975, home prices have produced an average five-year return of 26% and an average 10-year return of 57%, according to a Realtor.com analysis of Freddie Mac data. To put the figures in context: Those averages include lows of 14% over five years (Oklahoma) and 31% over 10 years (West Virginia), and highs of 36% over five years and 87% over 10 (Massachusetts).

Every dollar of appreciation equals a dollar of equity, which, in turn, equals another dollar of wealth.

Community and Stability

Another intangible benefit of homeownership is the ability to put down roots without worrying that you’ll have to relocate if rents climb too high. Several studies, including one published in the International Journal of Environmental Research and Public Health, established that feeling like part of a community and engaging in meaningful activities within the community have positive effects on mental and physical health.

Financial Security in Retirement

Real estate is a source of wealth that can help to secure your retirement. Paying off your mortgage before you retire reduces your monthly housing costs to taxes and insurance and leaves more money available for other expenses. Or you can convert your equity to cash and use the funds to supplement Social Security and retirement savings.

One way to do that is to downsize into a less expensive home. When the home sells, you pay off the mortgage and purchase the new home with the sale proceeds, and save or invest the rest. That way, you live mortgage-free and have extra money in the bank — about $100,000, if you’re like the typical downsizing retiree, according to Vanguard.

Depending on your financial situation and estate plan, you might borrow against your equity instead. A cash-out refinance, home-equity loan or line of credit or reverse mortgage could provide money to supplement other sources of retirement income.

Greater Control Over Your Living Space

If you’ve ever scrambled to clean up before a maintenance visit — or worse, come home to find that someone had been in for an emergency repair — you can appreciate the value of privacy. And it’s not just about the landlord or their vendors seeing your dirty dishes in the sink. It’s also the reminder that you’re living under someone else’s rules, in a home they own.

Conclusion

Owning a home is personally gratifying, and it can be a smart financial move as well. Each mortgage payment you make builds equity that increases your wealth and helps to secure your financial future.

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