Just Married and everyone is saying you should own your home! That's what you've been hearing from family and friends, right? You should own your own home...or should you? Let's weigh the benefits and see if buying is for you...
1) Pride of ownership is the #1 reason why people yearn to own their own home. It means you can paint the walls any color you want, turn up the CD volume, attach permanent fixtures and decorate your home according you your own taste. Home ownership gives you and your family a sense of stability and security. It is making an investment for your future.
2) Appreciation. Although real estate moves in cycles, sometimes up, sometimes down, over the years, real estate has consistently appreciated. The office of Federal Housing Enterprise Oversight tracts the movements of single family home values across the country. It's House Price Index breaks down the changes by region and metropolitan area. Many people view their home as a hedge against inflation.
3) Mortgage Interest Deductions. Home ownership is a superb shelter and our tax rates favor home ownership. As long as your mortgage balance is smaller than the price of your home, mortgage interest is fully deductible on your tax return. Interest is the largest component of your monthly mortgage payment.
4) Property Tax Deduction. IRS publication 530 contains tax information for first time home buyers. Real Estate property taxes paid for a first home and a vacation home are fully deductible for income tax purposes.
5) Capital Gain Exclusion. As long as you have lived in your home for two of the past five years, you can exclude up to $250,000 for an individual or $500,000 for a married couple, of profit from capital gains. You do not have to buy a replacement home or move up. There is no age restriction, and the "over 55" rule does not apply. You can exclude the above thresholds from taxes every 24months, which means you could sell every two years and pocket your profit subject to limitation-free from taxation.
6) Preferential Tax Treatment. If you receive more profit than the allowable exclusion upon a sale of your home, that profit will be considered a capital asset as long as you owned your home for more than one year. Capital assets receive preferential tax treatment.
7. Mortgage Reduction Builds Equity. Each month, part of your monthly payment is applied to the principal balance of your loan, which reduces your obligation. The way amortization works, the principal portion of your principal and interest payment increases slightly every month. It is lowest on your first payment and highest on your last payment. On average, each $100,000 of a mortgage will reduce in balance the first year by about $500.00 in principal, bringing that balance at the end of your first 12 months to $99,500.
8. Equity Loans. consumers who carry credit card balances cannot deduct the interest paid, which can cost as much as 18% to 22%. Equity loan interest is often much less and it is deductible. For many homeowners, it makes sense to pay off this kind of debt with a home equity loan. Consumers can borrow against a home's equity for a variety of reasons such as, home improvement, college, medical or starting a new business. Some states restrict home equity loans.
So now you know, home ownership is the best decision for you. You are focused and certain. Good. Next time we will define search parameters!
Talk to you soon,
Evelyn Johnston
Prudential One Realty
Real Estate Agent
evelyn@evelynjohnston.com
574-304-7148
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