First Time Homebuyers
If you're like most first-time home buyers, you've probably listened to friends', family's and coworkers' advice, some of whom think that it's too hard to buy a home. You may wonder if buying a home is still the right thing to do after what you’ve seen happen to the market. Having reservations is normal. The more you know about why you should buy a home, the less scary the entire process will appear to you. Right now is the perfect time to enter the market. This combination of low home prices and low rates is once in a lifetime. Here are some good reasons why you should buy a home.
· Ownership
Pride of ownership is the number one reason why people yearn to own their home. It means you can paint the walls any color you desire, turn up the volume on your TV, attach permanent fixtures and decorate your home according to your own taste. Home ownership gives you and your family a sense of stability and security. It's making an investment in your future. The alternative is rent; basically, paying someone else’s mortgage. Why would you do that? Owning a home is way to force you to add to your savings and retirement.
· Appreciation
Although real estate moves in cycles, sometimes up, sometimes down (really far down), over the years real estate has consistently appreciated. The Office of Federal Housing Enterprise Oversight tracks the movements of single family home values across the country. The prices of homes have fallen significantly since 2007. However, home investments are still a hedge against inflation. Even though in this short term a lot of equity was lost, the long term shows that home values have appreciated. Plus, the best time to buy is when values are low and stabilizing.
· Taxes, Taxes, Taxes
Home ownership is a superb tax shelter and our tax rates favor homeowners. As long as your mortgage balance is smaller than the price of your home the mortgage interest is fully deductible on your tax return, and interest is the largest component of your mortgage payment.
Until the end of April, first time home buyers can get a tax credit of $8,000. This isn’t a deductible in which you save money when you do your taxes. A check will be mailed to you in the amount of $8,000. Don’t miss this great opportunity. You are considered a first time home buyer if you have not owned a property in three years and the home is going to be your primary residence.
IRS Publication 530 contains tax information for first-time home buyers. Since you’re a First Time Home Buyer, your closing costs can be written off. Real estate property taxes paid for a first home and a vacation home are fully deductible for income tax purposes. In California, the passage of Propostition 13 in 1978 established the amount of assessed value after property changes hands and limited property tax increases to 2% per year or the rate of inflation, whichever is less.
As long as you have lived in your home for two of the past five years, you can exclude up to $250,000 for an individual or $500,000 for a married couple of profit from capital gains. You can exclude this from taxes every 24 months, which means you could sell every two years and pocket your profit free from taxation.
If you receive more profit than the allowable exclusion upon sale of your home, that profit will be considered a capital asset as long as you owned your home for more than one year. Capital assets receive preferential tax treatment.
Consumers who carry credit card balances cannot deduct the interest paid, which can cost as much as 18% to 22%. Equity loan interest is often much less and it is deductible. Right now mortgage rates are the best that we have seen in 15 years. For many home owners, it makes sense to pay off this kind of debt with a home equity loan. Consumers can borrow against a home's equity for a variety of reasons such as home improvement, paying for children’s college, medical bills or starting a new business.
