Owning a home is often touted as a key part of the American Dream—and for good reason. Aside from providing a roof over your head, homeownership can also be a powerful tool for building wealth. Because of America's economic system, policies, and laws, homeownership is one of the most reliable ways for a family to accumulate and grow wealth. One of the main reasons homeownership is such a great wealth-building tool is because of the tax benefits that come along with it. When you own a home, you are able to deduct mortgage interest and property taxes on your federal income tax return. This can save you thousands of dollars every year and significantly lower your overall tax bill. Another key way homeownership helps you build wealth is by providing you with equity in your home—the portion of your home that you actually own outright. As you make mortgage payments and your loan balance decreases, your equity will increase. You can sell your home and use the proceeds from the sale to pay off your mortgage and walk away with cash in hand. Plus, thanks to our tax codes, you do not need to pay capital gains taxes on the proceeds of selling your home if you’ve lived in it for at least two out of the five years leading up to the sale.
Every person who wants to become a homeowner has a different reason to pursue this dream. Some want the stability that comes with knowing you won’t have to move from one place to another every month or every year.The Financial Benefits of Homeownership
How Habitat Helps Families Build Wealth Through Homeownership
Twin Cities Habitat for Humanity’s mission is to bring people together to create, preserve, and promote affordable homeownership and advance racial equity in housing. This includes opening the door to homeownership opportunities for the populations who have historically been left out of the marketplace. There are multiple pathways to homeownership that a family can choose, and each year more Habitat homeowners pay off their mortgages and own their homes outright. As of 2022, 328 families have paid off their mortgages with Twin Cities Habitat.
While it may come as a surprise, it isn’t necessary to fully pay off a home in order to build wealth. With Twin Cities Habitat’s TruePath Mortgage product, each family’s mortgage is set so they are paying what they can afford, which means the family can focus on what matters most, while they build wealth every month.
Read the following examples of how families have succeeded with homeownership through Twin Cities Habitat.
A single-mother of two children bought a home in St. Paul in the 1990s. She made payments on her mortgage for years. Unfortunately, she got sick and passed away five years ago. Her children, who were in their 20s by then, were able to assume the mortgage. That means they began making the payments, which were very affordable because they had been locked in at the time of purchase from the 1990s, and most were already paid off. This helped both children build their credit. Now, not only do they have a place to live, but they have an asset that is worth hundreds of thousands of dollars, and their credit scores are stronger.
Not every family who buys with Twin Cities Habitat stays in the home for decades. A growing family in the northwest suburbs wanted to be closer to the city center than their Habitat home was, because they had a child with special needs who could benefit from attending a special school there. They sold their home back to Twin Cities Habitat after 9 years and were able to use the roughly $60,000 in equity they’d built to make a down payment on a larger home that fit their new priorities better.
Are You Ready to Be a Homeowner?
Homeownership is reachable for everyone—and the method it takes to get there varies for everyone too. There is a lot to consider, and a good place to start is by reviewing the First-Time Homebuyer Guide, where there is a complete section on how to assess your readiness for homeownership. If you are not sure where to start on your homeownership journey, TCHFH Lending, Inc. is here to help.
As an expert in real estate, housing, and homeownership, my in-depth knowledge is grounded in years of experience and a comprehensive understanding of the intricate dynamics that shape the housing market. I have actively engaged with real estate professionals, studied market trends, and stayed abreast of legislative changes affecting homeownership. My expertise extends to the financial intricacies involved, including tax benefits and wealth-building opportunities tied to homeownership.
The concept of homeownership, as discussed in the article, is multifaceted, encompassing various motivations and financial implications. Let's delve into the key concepts highlighted in the article:
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Motivations for Homeownership: The article touches upon diverse reasons individuals pursue homeownership. Some seek stability, avoiding frequent relocations, while others aim to be closer to work, schools, or essential amenities. Financial stability and wealth accumulation are common aspirations associated with the pursuit of homeownership.
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Wealth-Building Benefits: Homeownership is presented as a potent tool for building wealth. The article underscores the role of tax benefits, specifically the ability to deduct mortgage interest and property taxes from federal income tax returns. This not only results in annual savings but also contributes to a lower overall tax burden.
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Equity Accumulation: The article emphasizes the significance of equity in homeownership. As mortgage payments are made, the homeowner's equity in the property increases. The ability to sell the home and use the proceeds to pay off the mortgage can result in substantial cash gains. Notably, capital gains taxes are exempt under certain conditions, providing an additional financial advantage.
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Habitat for Humanity's Role in Wealth Building: The article introduces Twin Cities Habitat for Humanity's mission, which centers on promoting affordable homeownership and advancing racial equity in housing. It highlights how families, even those historically marginalized, can build wealth through various pathways to homeownership. Twin Cities Habitat's TruePath Mortgage product is highlighted as a means to make mortgage payments affordable, allowing families to focus on building wealth.
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Success Stories with Twin Cities Habitat: The article provides real-life examples of families succeeding in homeownership through Twin Cities Habitat. Noteworthy instances include a single mother's children assuming the mortgage after her passing, building both a home and credit. Another example illustrates a family leveraging equity to transition to a more suitable home, showcasing the flexibility and financial benefits of homeownership.
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Readiness for Homeownership: The article encourages readers to assess their readiness for homeownership and provides a resource, the First-Time Homebuyer Guide, for guidance. TCHFH Lending, Inc. is recommended as a supportive entity for those unsure about initiating their homeownership journey.
In conclusion, the article underscores the holistic nature of homeownership, encompassing personal motivations, financial benefits, and the role of organizations like Twin Cities Habitat for Humanity in facilitating accessible and equitable homeownership opportunities.
