Eight Reasons to Buy a Home
Most first-time homebuyers receive lots of advice from friends', family's and coworkers' many of whom are sharing reason they bought their first home. However, you may still be wondering “for us is buying a home now the right thing to do”. Relax. Having reservations is normal. The more you know the more comfortable you will become with the entire process. Here are eight good reasons why you should buy a home.
Pride of Ownership
Pride of ownership is the number one reason why people yearn to own their home. It means you can paint the walls any color you desire, turn up the volume on your CD player, attach permanent fixtures and decorate your home according to your own taste. Home ownership gives you and your family a sense of stability and security. It is making an investment in your future.
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 tracks the movements of single family home values across the country. Its House Price Index breaks down the changes by region and metropolitan area. Many people view their home investment as a hedge against inflation.
Mortgage Interest Deductions
Home ownership is often our only tax shelter and our current tax system favor homeowners. As long as your mortgage balance is smaller than the price of your home, mortgage interest is most often deductible on your tax return. Interest is the largest component of your mortgage payment.
Property Tax Deductions
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. There is no age restriction, and the "over-55" rule does not apply. You do not have to buy a replacement home or move up. You can exclude the above thresholds from taxes every 24 months, which means you could sell every two years and pocket your profit--subject to limitation--free from taxation.
Preferential Tax Treatment
If you receive more profit than the allowable exclusion upon 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.
Equity
Each month, part of your monthly payment is applied to the principal balance of your loan, which reduces your obligation. The amount of reduction 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 in principal, bringing that balance at the end of your first 12 months to $99,500.
Home Equity Loans
Consumers who carry credit card balances cannot deduct the interest paid, often costing 18% to 22%. Home Equity Loan interest is often much less and it is deductible. Consumers can borrow against a home's equity for a variety of reasons such as debt consolidation, home improvement, and medical emergencies.
This is not intended to offer specific tax or legal advice, you should contact competent council.
