Owning a home may not seem like a strategic business move and many small business owners have elected to remain renters in the Phoenix market after the market crash. Those who have sought financing for their businesses, however, may see the benefit of owning versus renting and I’d like to share with you a few insights:
Better Scoring with the Lender: If you are applying for a business loan, know that the lenders will use certain criteria to score your loan application. By the simple fact that you are a homeowner, you are given a better score in the process for a variety of reasons.
Collateral: Your home is an asset, which could be used as collateral against a business loan. For a consulting type business that typically does not have securable assets, this can be the difference between getting that business loan approved or not. Lenders like collateral because they don’t like risk and they don’t like loans that default.
Borrowing Against Equity: For those who have equity in their homes, they can often borrow against that equity in the form of a home equity loan. Now, you may not be able to borrow at the loan-to-value limits that you could in the past – for example, back when the banks were a bit careless. However, if you have any equity at all, you might be able to leverage that. Not to mention, as you pay down the loan, you will free up equity over time.
Take Home More Money: Mortgage interest and real estate taxes are tax deductible. This means that if you own a home, you can write off a certain portion of your house payment. It also means that if you are taking payroll (which every business owner should do) you can withhold fewer taxes from your paychecks. By the way, that W2 income from your own payroll will also give you favor with the underwriter when applying for your home mortgage. The folks at BASC Expertise can answer the tax questions specific to your situation.
With mortgage interest rates as low as they are and amazing loan programs such as the ½% down FHA Mortgage, is there a reason why you would not consider becoming a homeowner, especially if it can help your business?
About The Author
Richard Simon is a residential mortgage expert, Founder of AZ Lending Experts (a Phoenix based mortgage company) and co-founder of Realty AZ Central, a Phoenix Arizona based real estate marketplace offering a host of home buyer and seller resources including home selling tips, and a local real estate agent network.