14 ADVANTAGES OF BUYING A HOUSE

HOMEOWNERSHIP BUILDSWEALTH OVER TIME

CAPITAL GAINS

1- GRANDFATHER DEBT2- HOME ACQUISITION DEBT3- HOME EQUITY DEBT

03BUILD EQUITYEVERY MONTH

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05TAX DEDUCTIONS ONHOME EQUITY LINES

If you buy a home, that you canactually afford, be it for cash or onmortgage it is going to appreciate invalue over long term. This is becauseland is the only asset whose value isknown to appreciate every year.

Home owners are eligible to getcapital gains when they sell off theirreal estate property. Any person canclaim capital gains up to $500,000or even more on their state and thefederal tax returns

To qualify for the$250,000/$500,000home sale exclusion,you must own and

occupy the home asyour principal

residence for at leasttwo years before you

sell it.

What is Home equity? Home equitybasically means the current marketvalue of the home. This money hasalready been paid by the homeowner for the ownership of thehouse. The balance amount that

has to be paid on the mortgage willnot form part of the equity. Themore balance you pay, the morewill be the amount of home equity.

Thus, the home equity increasesmonth after month

Home ownership is bound toshower the home owners with acouple of tax benefits. You canclaim the deduction for the rateof interest on mortgage and/oryour house property and even theproperty tax that you pay on thereal estate property. This benefitcan be used every year

Mortgage amount = $300KTerm in years = 30 yearsInterest rate = 4.5%Federal tax rate = 25%State tax rate = 8%

Monthly payment = $1,520

Besides the interest on mortgage you can also claim the deduction of theinterest that you pay on the home equity lines. This means that you can shift thedebts of your credit card to your home equity loan. The benefit here is, you’ll beeligible to pay lower rate of interest. Moreover, the deduction on the interest is

available too.

Mortgage TaxDeduction

THE BENEFITS OF BUYING A HOME WILL LAST EVEN BEYOND THE PURCHASE OFTHE LOAN. HERE WE HAVE LISTED 14 BENEFITS OF HOME OWNERSHIP.

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If you put 10% down

($10,000) on a $100,000

property and the

property goes up 5% in

value (to $105,000),

you’ve actually made

50% on your $10,000

investment

Your home is currently worth$200,000, if it rises to $225,000 in

five years, you’ll have $25,000more equity.

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TREMENDOUS FREEDOM TOCREATE THE LIVINGENVIRONMENT YOU DESIRE

You can do virtually anything youwant inside your property. Paintthe walls red or purple. Mount abig-screen TV on the wall.Replace the window coveringsand lighting fixtures. You don’tneed permission to do so.

When you pay the amount of themortgage and the principalamount of the loan every month,

it is like a forced saving. Everymonth the value of equity of yourhome is rising. Thus, you’re forcedto save more and more everymonth.

The mortgage rates will bring instability. People buy only thosehouses that they know they canafford. There is also a sense ofstability in how a homeowner willview the community. They knowthey have a permanent home, sothey’ll interact with the neighborsmore.

Inflation often affects our jobsand our purchasing power.However, your home is aninvestment that is going toprovide you a full cover up even incase the value of the currencyfalls down. Typically almost all thehard assets including the homesprove to be an excellent hedgeagainst the inflation.

In the initial few years, one mightfeel that it is cheaper to take anapartment on rent. However, withtime you’ll notice that the interestrate lowers down. There will be atime, when the interest that youpay for your own home would belower than the rent that you payout to the landlord. Thus, it isalways better, to pay it for yourown house rather than staying ina rented space.

MORTGAGE IS LIKE AFORCED SAVINGS PLAN

LONG TERM, BUYING ISCHEAPER THAN RENTING

YOUR MONTHLY PAYMENTSWILL REMAIN STABLE

HEDGING AGAINSTINFLATION

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Ryan purchased a home in May of2013 and financed the home with a15­year mortgage. Ryan also prepaidall of the $9,240 in private mortgageinsurance required at the time ofclosing in May. Since the $9,240 inprivate mortgage insurance isallocable to periods after 2013, Ryanmust allocate the $9,240 over theshorter of the life of the mortgage or84 months. Ryan's adjusted grossincome (AGI) for 2013 is $76,000.Ryan can deduct $880 ($9,240 ÷ 84x 8 months) for qualified mortgageinsurance premiums in 2013. For2014, Ryan can deduct $1,320($9,240 ÷ 84 x 12 months) if his AGIis $100,000 or less.

In this example, the mortgageinsurance premiums are allocatedover 84 months, which is shorterthan the life of the mortgage of 15years (180 months).http://www.irs.gov/publications/p936/ar02.html

There are multiple tax benefitsthat can be availed if you are ahome owner. In case, you pay themortgage home insurancepremium then the entire amountcan be claimed as a deduction asper the income tax rules.

When you buy a home onmortgage and clear off yourmonthly payments on time, yourcredit score is good. You can askthe financial institution (fromwhere you took the home loan) toissue a credit certificate to you. Thiscredit certificate will have yourcredit score. Having a good creditscore is beneficial in case, you’replanning to take any more loans inthe future.

You can even use the home to attain some money to clear off any past debts.The money from the current home can also be used as a transition to thesecond home. You can use the home to obtain money to pay off debt or totransition to a second home.

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MORTGAGE INSURANCEMAY BE DEDUCTIBLE

CREDIT BUILDER

BORROWING POWER

HOW TO BUY A HOUSE STEP BY STEPFOR FIRST TIME HOME BUYER

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