The American Dream
Homeownership is part of the American Dream and a great way, if done correctly, to build wealth over the long haul. In recent years, first time buyers made up 40% of the real estate market. Your first purchase is both exciting and intimidating. Just remember, we are here to help you make the best decision for your budget. Here are some facts to consider:
The U.S. Tax Code offers many advantages for homeowners. First, you can deduct the interest you pay on your mortgage, property taxes and some of the costs involved in buying your home which could reduce the overall cost of your purchase through tax savings. Second, any increase in your property value is tax-deferred until the time you sell. Lastly, real property enjoys a $250,000 federal tax-exemption ($500,000 for married couples). Always check with your tax advisor on your eligibility.
Own vs. Rent
Paying rent is money spent, but a mortgage payment is an investment. This is because some of your monthly payment is used to pay-down your loan balance. At the end of a typical mortgage loan, the house is 100% yours. Renters own nothing.
Since a home’s value typically increases over many years and the price you paid does not change, it can be a great way to build wealth while providing a permanent living space for your family. Assuming a 2% annual price appreciation over the life of a 30-year mortgage, an initial $300,000 investment could grow to over $543,408!
Unlike rent, a fixed mortgage payment does not increase over time, so your housing costs may actually decline as you own the home longer. Plus, the landlord can decide to evict you from the property leaving you with no viable options. When you have a family, this complication could disrupt school, work, friends and other social activities. A home is more than a space, but a place to live!