; You build equity. Some of each monthly mortgage payment goes toward the loan’s interest. Other portions may go to homeowner’s insurance and county taxes. The remainder pays down the loan principal. Every dollar put toward your loan’s principal represents a dollar of equity — actual ownership of the property. Further, the property should appreciate in value each year, further adding to equity (what the house could be sold for versus what is owed on it). With certain blip periods such as the 2006 housing bubble burst, home prices in the US appreciate nationally at an average annual rate between three and five percent (home value appreciation in different metro areas can appreciate at markedly different rates than the national average). ; Improvements increase your home’s value. A homeowner can also increase a home’s value through home improvements, thus both making your home more comfortable and enjoyable while growing its loan-to-value (LTV) ratio. For instance, adding a bathroom or finishing a basement substantially increases the property’s functionality and curb appeal, while potentially boosting its value. ; Tax advantages of homeownership. You qualify for major tax benefits when you buy a house, both at the time of purchase and for the remainder of period you own the home. • Homestead exemption. Many states exempt any and all owner-occupied homes (homesteads) from a portion of the property tax amount that would normally accrue. For instance, Louisiana exempts the first $75,000 of a home’s value from property tax assessments, such that a $200,000 home in New Orleans is taxed as if it were only worth $125,000. • Federal tax deductions. Property taxes and interest paid on your mortgage can be deducted if you itemize your federal income taxes, reducing your income tax burden. Additionally, discount points can be claimed on the loan. Mortgage points are generally of two types: discount points
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