Are you sick of renting? Are you tired of paying money to your landlords and paying off THEIR mortgage? Don’t you wish you could have a place to REALLY call home? There is nothing like that feeling of walking into a home you can truly call yours. These are some of the reasons people choose to purchase their first home:
Pride of ownership is the greatest advantage of owning your own home compared to renting an apartment. What this means is that you own EVERYTHING. You can blast your stereo late at night. You can paint the walls hot pink or lime green. You can make a treehouse in the backyard. Owning your own home gives you full control over your lifestyle. Imagine being able to walk into your home and if you don’t like the way something looks, not having to ask permission, just making the decision to make the change.
Appreciation is the increase in the value of your asset, which in this case is your home. Real estate always moves in cycles, usually up, sometimes down. However, real estate has consistently appreciated throughout the years. This means you can be assured of an investment, that when purchased correctly, will continue to appreciate for years.
Paying your mortgage builds more and more equity. As you pay your mortgage, you increase your equity, which is difference between the current market value of your home compared to your mortgage loan. This gives you leverage! What goes on behind the scenes, is that part of your monthly mortgage payment goes toward the principal balance of your loan. This reduces what you have to pay in total for your mortgage. The process of paying your principal and interest with each mortgage payment is illustrated by the amortization schedule. The amortization schedule reveals the specific dollar amount put towards interest, as well as the specific put towards the principal balance, with each payment. Initially, a large portion of each payment is devoted to interest. As the loan matures, larger portions go towards paying down the principal. This means the longer you own your home, the more the total loan amount gets reduced from each payment!
The tax benefits are great from owning your own home. Owning your home is a great tax shelter. As long as you make sure that your mortgage balance is less than the price of your home you can fully deduct the mortgage interest from your tax return! Any real estate property taxes that you pay for a first home and a vacation home are fully deductable for income tax purposes! Of course, here in Florida there is no income tax, but the overall tax benefits are great regardless! Also, if you sell your home in the future and you get more profit than what is the allowable exclusion, then that profit will be considered a capital asset if you’ve owned the home for more than a year. Selling your home as a capital asset gives you preferential tax treatment. Make sure to get in touch with a good tax accountant to fully take advantage of these tax benefits.
Capital gain exclusion gives you great tax benefits when you sell your home. If you end up selling your home, as long as you’ve lived there for two of the past five years, you exclude up to $250,000 for an individual or $500,000 for a married couple. What’s even better is that you don’t even have to buy another house to get the benefits from the capital gain exclusion! There are no age restrictions on the capital gain exclusion, including no "over-55" rule. This exclusion can be used every 24 months. This means every two years you can sell your residence and be able to pocket your profit free from taxation.
Owning your home allows you to utilize the benefits of equity loans. Credit card balances cannot have their interest paid deducted. Equity loan interest is usually much less than credit cards and their interest is deductible. You can borrow against your home’s equity for reasons such as improving your home, medical bills, or even starting a new business.
Purchasing a home, as long as it’s purchased correctly and with the right professionals in your corner, is always a good investment. Nothing beats the feeling of home ownership and the pride of knowing that your home is truly your castle.
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