Beyond owning a great place to live, home ownership has some appealing financial benefits.

  • Home Ownership Builds Wealth. Owning a home can be a very good way to create wealth over the long term. Buy a home you can afford that is a good value and that you will stay in more than a short time – 5 years at least, or 7-10 years ideally.
  • You’re Adding to Your Equity Every Month. Equity is the amount of money you’d get for selling your home, minus what you still owe on your mortgage. A portion of each monthly mortgage payment pays down the money you owe, called the loan principal and adds to your equity. This portion of the monthly payment increases every year, so the longer you stay, the quicker your equity builds.
  • A Mortgage Is Automatic Savings. Those monthly payments to pay down loan principal are building your assets, just like an automatic savings plan.
  • Buying Is Cheaper than Renting over the Long Term. The interest portion of your monthly mortgage payment decreases over time, so if it’s not lower than your rent to begin with, it will be eventually. And even though interest is an expense like rent, unlike rent, it’s tax deductible, as explained next.
  • You Get Tax Deductions. 1) The mortgage interest you pay each year is deductible on your Federal income tax return. 2) You can also deduct the property taxes you pay on your primary residence and a vacation home. 3) For the year you buy your home, you can deduct the points, called origination fees, on your mortgage. 4) If you take out a home equity loan or line of credit, any interest you pay on the money you borrow is also deductible. This lets you shift credit card balances to a loan with a lower interest rate. And that interest is tax deductible, which credit card interest is not.
  • You Can Get a Capital Gains Tax Exclusion. This applies to a home that’s your primary residence for more than two years. When you sell, you can keep up to $250,000 in profits if single, up to $500,000 if married—without owing any tax on those capital gains. As with all tax matters, please contact a tax professional before making any decisions.

When you want to take advantage of these financial benefits by buying a new home or refinancing your current one at a lower rate, or to fund improvements, please contact us. There are a wide range of financing options – feel free to call or email any time. Have a great day!

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