500,000 Reasons Why Owning a Home Is Better Than Renting

There are only a few vehicles to grow your money tax free. Most people think it is the Roth IRA. You pay taxes before you make your contribution and are allowed to withdraw the balance at age 59 1/2 or older without any income taxes due. What if I told you there was a better way?

Real estate - Many people only think about the annual tax deduction they get on their mortgage and forget that a married couple filing jointly can walk away with a cool $500,000 tax free on the gain of their home. Single people can walk with up to 250,000 tax free. This is an often overlooked tax free investment.

Example: Home purchased in 1975 for $35,000 Home sold in 2010 for $535,000. The married couple get to keep the entire $500,000 gain tax free. In addition their interest payments reduce their taxable basis annually netting them a larger savings over time. This is how the rich get richer- tax loop holes.

As you pay your monthly payment each month the balance drops and historically the property value has increased. There is also a lot of flexibility when owning real estate/.

Some people can argue their rent is much less than owning. However, rents rise and mortgages remain stable. So while rent may seem less expensive consider the long term benefits of owning versus renting.

Fact - Most wealthy people own real estate.

Owning real estate also offers flexibility in retirement years. Assuming you pay down your mortgage balance to a point that you have plenty of equity, the home owner can request a Home Equity Conversion Mortgage or HECM. An HECM allows the home owner to use their home equity much like an annuity. A loan is made and rather than the home owner making a monthly payment the bank pays a monthly payment to the home owner.

Imagine what $500,000 could do for a married couple in their retirement years, especially if it was paid without any tax implications! Add any other savings the couple has saved and they can enjoy their retirement comfortably.

If you have considered buying a home but were reluctant because the payment seems larger than your rent payment, consider that the mortgage interest you pay is tax deductible. This savings reduces the amount you owe when you factor in the tax deductible benefits.