Benefits of Buying a Home
Buying a home seems like a daunting experience, but now, more than ever, it is a smart move to invest in buying a home, and building home equity. There are several advantages to buying a home besides pride in ownership, which alone is a good reason! Money is a big issue with everyone right now and rightfully so. Buying a home and building home equity is a win-win situation. There are also several tax benefits to buying a home.
Reduction in mortgage builds equity:
Every month that you make a mortgage or house payment, the amount which is above the interest amount is built as equity of your home. Equity builds up to a lot after time and can be saved, or turned into a home equity loan or line of credit.
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Home Equity Loans:
Unlike most credit and credit card loans, you can deduct the interest on a home equity loan. The loan is given against the equity in your home; the money can be used for home improvement, college tuitions, or even starting your own business. These are a win-win situation because the interest rate is lower, and you can add value to your home by making home repairs.
Capital Gains Exclusion:
$250,000 per individual or $500,000 per married couple can be excluded every 24 months as long as you have lived in your home 2 out of the last 5 years. This also applies to people over 55 years of age. With the Capital Gains exclusion, that can add up to a tidy profit should you decide to sell.
Perks for first home and vacation home buyers:
Taxes paid for a vacation home or a first home are completely deductable on income tax. There are also laws in certain states, such as California, which add other perks to these home buyers.
Mortgage interest is deductable:
So long as you have paid off at least part of your mortgage principal, and your mortgage balance is less than the price of your home, you can fully deduct the mortgage interest off of your taxes.
Appreciation:
When you buy a car, the value decreases every year, which is called depreciation. Buying a home, however, and building the home equity increases the value and is called appreciation. While the amount of the appreciation may fluctuate, overall, it is a value building asset to buying a home.
Home equity may just be the saving grace for many people in this economy. Especially given the above reasons, buying a home is actually money in the bank. You are building value and equity with each payment you make. Although laws may change, and the economy may fluctuate, nothing takes away the equity that is built when you own a home.
We may just be moving into a time when buying a home and building up that home equity is in the favor of the home-buyer. The housing market had recently hit a slump, but someone, at some point, is going to have to get those houses sold and that may work in the new home buyer’s favor.
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