7 Reasons To Buy A Home

1. Income Tax Savings

Because of income tax deductions, the government is subsidizing your purchase of a home. All of the interest and property taxes you pay in a given year can be deducted from your gross income to reduce your taxable income.

For example, assume your initial loan balance is $150,000 with an interest rate of eight percent. During the first year you would pay $9969.27 in interest, assume you paid twelve payments that year. As a result of these interest payments, your taxable income would be almost $10,000 less - due to the IRS interest rate deduction.

Property taxes are deductible, too. Whatever property taxes you pay in a given
year may also be deducted from your gross income, lowering your tax obligation.

For most Americans that do not own a home, they do not have enough deductions to file their taxes with the itemized schedule and must settle for a standard deduction. When you own a home, the mortgage interest as well as the property taxes, State and Local taxes are all deductible. This savings in your tax liability can save hundreds of dollars for new homeowners.

2. Stable Monthly Housing Costs

When you rent a place to live, you can certainly expect your rent to increase each year, or even more often. If you get a fixed rate mortgage when you buy a home, you have the same monthly payment for the number of years you financed the home. Even if you get an adjustable rate mortgage, your payment will stay within a certain range for the entire life of the mortgage -and interest rates aren't as volatile now as they were in the late seventies and early eighties.

Imagine how much rent might be ten, fifteen, or even thirty years from now?

Which makes more sense, locking in your housing cost to a manageable amount or one that can continue to increase year after year?

3. Appreciation Potential

Some people are just lousy at saving money, and a house is an automatic savings account. You accumulate savings in two ways first, every month, a portion of your payment goes toward the principal. Admittedly, in the early years of the mortgage, this is not much. Over time, however, it accelerates.
Second, your home appreciates. For 80% of homeowners the largest investment they will ever make is their home. In the long run, investments in homes far outpace inflation. Homeowners build equity and, in most states, can borrower against it. Average appreciation on a home is approximately five percent though it will vary from year to year, and in some years may even depreciate. Over time, history has shown that owning a home is one of the very best financial investments.

As a fairly general role, homes appreciate about four or five percent a year. Some years will be more, some less. The figure will vary from neighborhood to neighborhood, and region to region.

Five percent may not seem like that much at first. Stocks (at times) appreciate much more, but take a second look.

Presumably, if you bought a $200,000 house, you did not pay cash for the home because you got a mortgage. Suppose you put as much as twenty percent down -that would be an investment of $40,000.

At an appreciation rate of 5% annually, a $200,000 home would increase in value $10,000 during the first year. That means you earned $10,000 with an investment of $40,000. Your annual "return on investment" would be a whopping twenty-five percent.

Of course, you are making mortgage payments and paying property taxes, along with a couple of other costs. However, since the interest on your mortgage and
your property taxes are both tax deductible, the government is essentially subsidizing your home purchase.

Your rate of return when buying a home is higher than most any other investment you could make.

4. Freedom & Individualism

When you rent, you are normally limited on what you can do to improve your
home. You have to get permission to make certain types of improvements. Nor
does it make sense to spend thousand of dollars painting, putting in carpet, tile or window coverings when the main person who benefits is the landlord and not you.

Since your landlord wants to keep his expenses to a minimum, he or she will probably not be spending much to improve the place, either.

When you own a home, however, you can do pretty much whatever you want. You get the benefits of any improvements you make, plus you get to live in an environment you have created, not some faceless landlord.

5. More Space

Both indoors and outdoors, you will probably have more space if you own your
own home. Even moving to a condominium from an apartment, you are likely to find you have much more room available, your own laundry and storage areas, and bigger rooms. Apartment complexes are more interested in creating the
maximum number of income-producing units than they are in creating space for each of the tenants.

If you are moving to a home for the first time, you are going to be very pleased with all the new space you have available. You may have to even buy more "stuff"!!!

6. Deferred Gain and Capital Gain Treatment

Current Real Estate laws allow married taxpayers filing a joint return to exclude up to $500,000.00 of gain on the sale of their principle residence. Single taxpayers can exclude up to $250,000 of gain. To qualify for the exclusion, homeowners must have lived in and used the home as their primary residence for TWO OUT OF THE PROCEEDING FIVE YEARS. Homeowners are allowed to take the exclusion ONCE EVERY TWO YEARS. There is no cap on how much total gain they may exclude in their lifetimes.

7. You Can Enjoy It – The Pride of Home Ownership

CAUTION: Before you make a financial decision based on tax laws, you should consult an expert on taxes as they relate to real estate, as laws regularly change.

bob.bradshaw@lakewoodhome.net

Toll Free 1-800-276-8119 ext. 106
Fax 1-616-301-1445