The Benefits of Buying and Owning a Home in California

What are the benefits of buying and owning a home in California? What are the tax benefits associated with homeownership? Does it makes sense for me to buy a house in California, or keep renting?

These are some of the most common questions first-time buyers have about the buying process. Today, we’ll break it down for you by looking at some of the top benefits of owning a home in California.

6 Big Benefits of Owning a Home in California

Homeownership brings many benefits, and they can vary from one person to the next. Some of the biggest advantages to buying and owning a home in California are the tax breaks you get, as well as the potential for price appreciation over time. Financial experts have long viewed homeownership as one of the best investments a person can make — and for good reason.

Here are some of the biggest benefits of buying and owning your own home in California:

1. You could own an appreciating asset.

A home is more than a place to live. It’s also an investment. And you’d be hard pressed to find a better investment than homeownership. Professional investors often put their money into real estate, for this very reason.

Consider the compelling evidence:

• At the start of 2012, the median home value in California was around $306,000 (according to Zillow).
• As of March 2022, the median price point in California had risen to $644,000 (same source).

Sure, home prices can dip now and then, especially in the pricier housing markets like San Francisco. But they tend to rise over the long term, sometimes substantially. That’s one of the advantages of owning over renting. You get to own something that grows in value over time.

2. You could take advantage of homeownership tax benefits (deductions).

Tax breaks are another big benefit to buying and owning a home in California. Homeowners in the Golden State are allowed to make several tax deductions, including mortgage interest and property tax.

We’ll defer to the experts on this one. In an article entitled “3 Common Tax Deductions for California Homeowners,” the Glendale-based tax consultants at Robert Hall & Associates wrote:

Mortgage interest is tax-deductible, but this year the deduction has been adjusted. The deduction is limited to interest on up to $750,000 of debt ($375,000 if you’re married filing separately) instead of $1 million of debt ($500,000 if married filing separately).

They added that California homeowners can also deduct some of their annual property taxes, generally up to $10,000 (or $5,000 if married and filing separately).

If you have a home office — as so many people do these days — you can take a tax deduction for that as well. These deductions can really add up, much to the benefit of homeowners. They bring another significant advantage to buying and owning a home in California.

3. You could boost your credit score.

Paying your mortgage payment every month could help you boost your credit score over time. If your score is already high, timely mortgage payments can help you keep it there.

According to the credit reporting agency Experian, your payment history influences your credit score more than any other single factor. As they state on their website: “Payment history is the most important ingredient in credit scoring, and even one missed payment can have a negative impact on your score.”

So, as you make that mortgage payment every month, you’re not only building equity. You’re also reinforcing your consumer credit score.

4. You can configure the home to suit your needs and lifestyle.

These days, more and more people are choosing to work from home either full or part time. The coronavirus pandemic gave this trend a major boost. This is another benefit to buying / owning a home in California. You can configure your home as needed to support your work habits and lifestyle.

The same cannot be said for renting. Try telling a landlord that you want to bump out a wall to expand your office space or workshop, and see what they say.

5. You could leverage your home equity down the road.

When you rent a home or apartment, you’re paying a monthly fee just to reside in the property. But you’re not gaining any ownership. You’re not making a long-term investment.

Homeownership is different. When you pay your mortgage payment every month, you’re growing your equity. Home equity is the portion of the property that you own, and it grows over time as you make your mortgage payments.

That’s the benefit of buying a home in California. You’re not just paying a monthly residence “fee.” You’re investing in an asset that you own, one that will likely appreciate over time.

And later on down the road, you could leverage your equity in the form of a home equity loan or line of credit. You certainly don’t have those benefits when renting.

6. You could avoid rent hikes and enjoy greater financial certainty.

Rental prices can change over time. Sometimes they go down, but most of the time they rise. As a renter, you have little to no control over this. You just have to accept it and hope you don’t get “priced out.”

When buying a home in California, you could enjoy the benefit of a fixed monthly payment that stays the same over the long term. Most home buyers choose the 30-year fixed-rate mortgage loan, for this very reason. It’s the most popular type of loan by a wide margin.

When you use a fixed-rate home loan, you’ll enjoy a lot more financial stability and predictability, compared to renting a home. You have a lot more control over your monthly costs, which makes long-term budgeting and financial planning much simpler.

So there you have them, six big benefits of buying versus renting a home in California!