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Thursday, January 3, 2013

Six benefits of buying a home

Capital gains tax reduces the amount of net profit from a home sale
Homeowners benfit from low rates, tax deductions and capital appreciation

If you’ve been a long-time renter contemplating taking the plunge and buying a home, you’re sure to find many perks to becoming a homeowner. That is especially true now as the real estate market favors buyers.

You might also be doing the math and thinking that renting doesn’t make sense when the money would be better spent going toward something that is yours. In this economic climate, there are myriad benefits to transitioning from a tenant to a homeowner.

1. Unbeatable prices


When you’re buying under repressed conditions, you’ll benefit from lower home prices. Right now inventory is tightening, so prices are slowly creeping upward. As a buyer, you might face competition from other bidders, but price levels are still well worth making a strong bid when you see a house you like.
Some home purchases generate rental income
Areas with beat down local economies may be worth investing in if they revive

2. Scooping up a deal on a distressed home 


The National Association of Realtors recently reported that foreclosures and short sales at big discounts made up 24 percent of sales in October. Foreclosures sold for about 20 percent less than market value, while short sales went for about 14 percent less. If you’re looking for a bargain, these can be a great deal. Some foreclosure homes are in rough shape and will require a little TLC, but the savings will typically far outweigh the money you put in to bring the house up to your standards.
 
 Downpayments are a requirement of many mortgages
Low rates lower mortgage costs

3. Low mortgage rates 


 Mortgage rates are still at historically low prices.  Freddie Mac recently reported the national average commitment rate for a conventional fixed-rate mortgage fell to a record-low 3.38 percent in October from 3.47 percent in September; the rate was 4.07 percent in October 2011.


4. Appreciation 


If you buy now when housing prices are near the lower end of the spectrum, you’re extremely likely to see your home’s value shoot up in the future. Instead of money spent on rent, you’ll be getting a potential return on your house as its value increases. For example, if you buy a house for $200,000 and in five years it’s worth $240,000, then you have $40,000 appreciation — $40,000 extra that you would have if you sell the house at the five-year mark.

 

5. Tax advantages 


Property taxes offset mortgage interest tax deductions
Interest tax deductions lower cost
When you buy a house, you’ll have the benefit of being able to deduct various expenses, including mortgage interest. That typically amounts to a fairly large chunk, especially in the early years of your loan when you’re paying mostly interest. You’ll also be able to deduct any points associated with your loan. Points are fees you pay to get a lower interest rate. You’ll also be able to shave off the cost of your property taxes, and, in some cases, your private mortgage insurance.


6. Pride of ownership 


Perhaps the most important reason of all is the overwhelming sense of pride that comes with owning a home. If you’re starting a family or have been hopscotching with your kids from rental to rental, your whole family will connect and bond in your new house in a community where you can build roots that last a lifetime.

* Home sales graph: www.calculatedriskblog.com
* All other images US-PDGov