Why High-Wage Earners Should Buy and Finance a Home

If you’re a high-wage earner, you might wonder whether it’s better to buy a home outright or finance it. While paying cash for a home eliminates mortgage payments, financing a home—even when you have the means to pay in full—can provide significant financial advantages, particularly when it comes to tax benefits.

Mortgage Interest Deductions: A Powerful Incentive

One of the most compelling reasons to finance a home is the ability to deduct mortgage interest on your taxes. The IRS allows homeowners to deduct interest paid on up to $750,000 of mortgage debt ($375,000 if married and filing separately). If you purchased your home before December 16, 2017, the limit is even higher. This means a portion of your mortgage payments (MOST OF YOUR PAYMENT IN THE EARLY YEARS OF A MORTGAGE) can lower your taxable income, potentially saving you thousands of dollars each year.

How It Works

For your home loan to qualify, the borrowed funds must be used to purchase, construct, or improve your primary or secondary residence. Additionally, if you purchased mortgage points to secure a lower interest rate, you may also be eligible for a tax deduction on those costs. Your mortgage lender will provide Form 1098 at the beginning of each year, detailing the total interest you paid in the previous year, which you can then use when filing your taxes.

Leveraging Liquidity for Greater Financial Growth

Financing a home instead of paying cash allows you to maintain liquidity, keeping your capital available for other high-return investments. For example, if your mortgage interest rate is 6% but your investments yield 8-10%, you’re earning more by investing your money elsewhere than you would by tying it up in home equity.

Inflation Protection and Wealth Building

With a fixed-rate mortgage, your monthly principal and interest payments remain constant, while inflation increases the value of tangible assets like real estate. Over time, your home appreciates in value while your debt effectively decreases in real terms, making homeownership a smart long-term wealth-building strategy.

Should You Buy Now?

Interest rates fluctuate, but waiting to buy could mean paying more for a home as property values continue to rise. If you’re a high-income earner, leveraging financing could allow you to maximize tax benefits while growing your wealth.

If you’re considering purchasing a home and want to explore financing options that align with your financial goals, reach out first to your accountant then get in touch with me. I’d be happy to help you navigate the home-buying process and connect you with top mortgage professionals to find the best financing solution for your needs.