During this time of year, the financial benefits of homeownership are evident with write offs for mortgage interest, real estate taxes and some closing costs deductions likes points on a new loan (or origination fees). There are other benefits to home ownership like the following:
1. Buying Is Cheaper than Renting In the Long Term
Although in the first few years, it may be cheaper to rent. If you don’t take money out (i.e. by refinancing the property), over time as the interest portion of your mortgage payment will decrease the principal portion (or equity portion) that you pay will eventually be lower than the rent you would have been paying. Your equity in your home is the amount of money you can sell it for minus what you still owe on it. But most importantly, you are not paying your landlord’s home or building’s mortgage, you are paying off your own property!
2. Homeownership Builds Equity Over Time
Although this past decade of real estate market’s bust has reduced homeowner’s confidence, it is why it’s so important the new “Qualified Mortgage” rules versus some of these liar loans of the past where you did not have to prove that you had the financial means to pay the mortgage payment. The way mortgages work is that the principal portion of your payment increases slightly every month year after year. It’s lowest on your first payment and highest on your last payment. Thus, your equity grows the faster that you pay off the loan!
3. Mortgage Tax Deduction Benefits
Mortgage deduction: The IRS tax code allows homeowners to deduct the mortgage interest from their tax obligations. This can be a huge deduction and can make the difference between claiming a standard deduction versus itemized deductions. Most people look at this benefit as one of the best benefits of home ownership.
In addition to your mortgage interest, you can deduct the interest you pay on a home equity loan (or line of credit).
Some closing cost deductions: The first year you buy your home, you are able to claim the points (also called origination fees) on your loan, no matter whether they are paid by you or the seller.
Property tax is deductible: Real estate property taxes paid are also deductible on your primary residence and a vacation home is for income tax purposes.
4. Capital Gains Exclusion
If you buy a home to live in as your primary residence for more than two years then you will qualify. When you sell, you can keep profits up to $250,000 if you are single, or $500,000 if you are married, and not owe any capital gains taxes.
Homes have traditionally been considered a safe investment, with values that rise moderately over time. According to the NAR (National Association of Realtors), “the national median home price has risen every year (even during recessions and periods of sales declines) since 1968. Typically, the values appreciate at the rate of inflation, plus 1 or 2 percentage points. Sometimes it’s a greater increase. In 2004, for instance, the median price went up by 9.4 percent.”
6. A Mortgage Is Like a Forced Savings Plan
Paying a mortgage every month and reducing the amount of your principal is like a forced savings plan. Each month you are building up more equity in your home. In a sense, you are being forced to save assuming the market remains stable.
If you are interested in buying a new home or an existing home, please contact me (Alan Lane with Keller Williams Realty at 2119 W Brandon Blvd, Brandon, Florida 33511) and I can help you find a new home in the Tampa Bay Area. The Keller Williams offices of ”Suburban Tampa” include the offices in Brandon, Plant City, Fishhawk Ranch, and our newest office in Valrico. My email address is email@example.com, or call me at 813.205.9280. If you are just starting your search, you can search the MLS for homes on my website at this link.