You are probably like most first time home buyers; you've listened to your friends and family's advice, most of which is usually to encourage you to purchase a home. Having cold feet is very normal. Prior to purchasing their first home many people wonder if it is the correct thing to do. Relax. This is fear is normal as well. Learning why you should buy a home makes the process much less frightening. Below are some very good reasons why you should buy a home.
Pride of owning your home
The pride of owning your own home is the primary reason people want to own a home of their own. This means you can decorate and paint your walls anyway you want, you can crank up the radio and best of all you can make your house your home. Owning your home ensures both you and your family a great sense of security and stability. Home ownership is an important investment in your future.
It is no secret to anyone that the real estate market is unpredictable. The past few years have been obviously quite turbulent. But despite the current tumultuous market real estate has consistently appreciated. A home to many people is seen as an investment and some security against inflation.
Deducting mortgage interests
Owning a home is an excellent tax shelter and our tax rates greatly favor the homeowner. Assuming you mortgage balance is not higher than the price of your house, mortgage interest is completely deductible. The largest component of your mortgage payment is the interest.
Deducting property taxes
First time home buyers should read IRS publication 530, it contains a lot of valuable tax information those that are purchasing a home for the first time. Property taxes paid for a first house and also for a vacation home are totally deductible on your income taxes. As a matter of fact in California proposition 13 established the amount of assessed value after property is exchanged. Limited property tax rises to 2% per year or the current rate of inflation.
Exclusion of capital gains
If you have lived in your house for two of the previous five years you are allowed to exclude up to $250,000 for an individual or $500,000 for a married couple of profit from capital gains. It is not necessary to buy a new home or purchase a large house. Age restrictions do not apply and the "over-55" rule does not apply either. You are allowed to exclude these thresholds from taxes every 2 years. This means that you could sell your home every 24 months and keep your profit. This would be subject to some limitations but free from taxation.
People that carry credit card balances are not allowed to deduct interest paid. This can cost you as much as 18% to 22%. The interest in an equity loan usually much less and it's deductible. Many home owners believe it makes complete sense to pay off this type of debt with a home equity loan. You can borrow against your homes equity for a slew of reasons. Home improvement, college tuition, medical expenses are but a few of these reasons. You should however read your states laws regarding home equity loans as they do vary and can come with some restrictions.