ADVANTAGES OF HOME OWNERSHIP
If you're like most first-time home buyers, you've probably listened to friends, family and coworkers encourage you to buy a home. You may still wonder if buying a home is the right thing to do. Relax, having reservations is normal. The more you know about why you should buy a home, the less scary the entire process will appear to you. Here are some sound reasons why you should buy a home.
Pride of Ownership
Home ownership 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's 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. Even the recent period of depreciation is quickly overshadowed if you look back just a few more years and take into account the appreciation seen there. 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 a superb tax shelter and US income tax rates favor homeowners. Mortgage interest is usually deductible on your income tax return. Interest is the largest component of your mortgage payment. The monthly principal and interest payment on a 5.5%, 30-year, fixed rate $100,000 loan is $568. $458 of that is for interest and therefore tax deductable when you itemize deductions. If your income tax rate is 25%, then you will realize $114 income tax reduction from this mortgage - EVERY MONTH.
Property Tax Deductions
IRS Publication 530 contains income tax information for first-time home buyers. Real estate property taxes are also deductible for income tax purposes. Using the above logic, for every $4 of real estate taxes per year you will realize $1 income tax benefit - MORE if your income tax rate is higher.
Morgage Reduction Builds Equity
Each month, part of your monthly payment is applied to the principal balance of your loan, which reduces your debt obligation and increases your ownership. 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 the first year by about $1000 in principal, bringing that balance at the end of your first 12 months to $99,000.
Posted by Clare Zickuhr at 7/22/2009 3:27 PM 
Categories: tax appreciation interest deduction
Tags: tax appreciation deduction
Categories: tax appreciation interest deduction
Tags: tax appreciation deduction
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