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Did you know that homeownership is one of the best ways to build wealth? Here is a full breakdown of how homeownership can benefit you.Buying a home? Click Here to Perform a Full Home SearchSelling a home? Click here for a FREE Home Price EvaluationThough it’s a dream for many of us to one day own a home, there are a few financial benefits of homeownership that you may not have considered. Saving money is one of the major benefits. You get to save the interest portion of your whole mortgage against your income for the year. Many people don’t realize that your monthly mortgage payment is broken down into two separate parts: mortgage interest and mortgage principal payment. While the first part of your monthly payment is fully tax deductible, the second part includes property tax. When you own a house in California, you’ll pay property tax on it. That portion of your monthly payment can be held against your income as well. In addition, during the first year you own a house, you’ll typically have origination fees from borrowing money with a loan. This can also be deducted against your income. So when you’re deciding whether it’s better for you to rent or buy a home, you need to determine your net payment and compare that to what you’re paying your landlord. “Owning a home is like a forced savings plan.” The other thing to consider about home ownership is that owning a home is like a forced savings plan. Remember when I said that your monthly payment is broken up into two parts—the principal and the interest? The principal part is the actual loan that you’re paying down. Let’s take a look at an example mortgage. If you’re paying $2,000 per month against your principal and you own the house for five years, this would equal $24,000 in principal reduction per year or $120,000 over the course of five years. This is a lot of money, but you’ve saved a lot of money that you wouldn’t have if you had rented the property. When you add it all up, this is how you build wealth in real estate. What happens at the end of this five-year period? If you own the house for more than two years, then in the state of California, you are eligible for a capital gains exclusion on your primary residence. If you’re single, this could mean up to $250,000 available for you to defer out in taxes, and if you’re married, you’re eligible for up to $500,000 in deferments per transaction. If you have any other questions about the benefits of homeownership or you’re looking to buy or sell a home in the Bay Area, feel free to give me a call or send me an email. I’d be happy to help you!