If you’re like most first-time home buyers, everyone has advice to give you; some encouraging you to buy a home, and some not. You’re starting to wonder if this is a good time, if the economy is going to crash more, if you can afford to buy this house. Well, we have some advice for you, too: Relax. Having doubts is normal. The more you know about why you should buy a home, the less scary the whole thing will feel.
Here are some very good reasons why you should buy a home now:
It’s an Investment in Your Future – You can paint the walls any color you want, you can listen to your stereo in the middle of the night, you can get that new fountain in your yard that you always wanted…it’s your house. Owning your own home gives you and your family both stability and security. It’s an investment in your future, and it will be good for all of you.
It’s a Buyer’s Market – The downturn in the economy and the bursting of the real estate bubble might actually be working in your favor right now. Housing prices are at a low, and you can afford a lot more house for your money than you used to be able to. Either take advantage of this and get an upgrade, or keep your payments low. Whatever you decide, it’s a great time to buy a house. more on this
Real Estate Appreciates – Real estate moves in cycles, it is true, but over time, real estate has consistently appreciated. Buying a new home can be an investment, and it is a hedge against inflation.
Mortgage Interest Deductions – Home ownership is a great tax shelter and tax rates favor homeowners. As long as your mortgage balance is less than the price of your home, mortgage interest is completely deductible on your tax return.
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 don’t have to buy a replacement home. You can do this every 24 months, which means you could sell a house every two years and put the monies in your pocket – with some limitations – tax free. Wow. That’s a great benefit.
Preferential Tax Treatment -If you receive more profit than the allowable exclusion when you sell your home, that profit will be considered a capital asset as long as you owned your home for more than a year. Capital assets receive preferential tax treatment…which means you won’t pay nearly the taxes on the profit that you normally would.
Equity -Each month, part of your mortgage payment is applied to the principal balance of your loan, which reduces your debt. This is building up equity in your home, and equity can be borrowed against. Do you have a credit card balance? The interest on credit card balances is often as high as 22%, and you can’t deduct the interest you pay on them. Not so with equity loans. Equity loan interest is often much less and it is deductible. You can borrow against a home’s equity, pay off your credit cards, and then deduct the interest off your taxes.
Buying your first home can be a scary thing, but knowing the benefits can calm those jitters you might be feeling. You can make your dream home a reality today, and there are great reasons for doing so, both financial and personal.