Central
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Real
Estate Buyer Tips
Buying
a home can be one of your most significant investments in life. Not only
are you choosing your dwelling place, and the place in which you will
bring up your family, you are most likely investing a large portion of
your assets into this venture. The more prepared you are at the outset,
the less overwhelming and chaotic the buying process will be. The goal of
this page is to provide you with detailed information to assist you in
making an intelligent and informed decision. Remember, if you have any
questions about the process, I’m only a phone call or email away!
The Best
Investment
As
a fairly general rule, homes appreciate about five percent a year. Some
years will be more, some less. The figure will vary from neighborhood to
neighborhood, and region to region.
Five
percent may not seem like that much at first. Stocks (at times) appreciate
much more, and you could earn over six percent with the safest investment
of all, treasury bonds.
Presumably,
if you bought a $200,000 house, you did not pay cash for the home. You got
a mortgage, too. Suppose you put as much as twenty percent down – that
would be an investment of $40,000.
At
an appreciation rate of 5% annually, a $200,000 home would increase in
value $10,000 during the first year. That means you earned $10,000 with an
investment of $40,000. Your annual "return on investment" would
be a whopping twenty-five percent.
Of
course, you are making mortgage payments and paying property taxes, along
with a couple of other costs. However, since the interest on your mortgage
and your property taxes are both tax deductible, the government is
essentially subsidizing your home purchase.
Your
rate of return when buying a home is higher than most any other investment
you could make.
If
you are moving to a home for the first time, you are going to be very
pleased with all the new space you have available. You may have to even
buy more "stuff."
Income Tax
Deductions
Because
of income tax deductions, the government is basically subsidizing your
purchase of a home. All of the interest and property taxes you pay in a
given year can be deducted from your gross income to reduce your taxable
income.
For
example, assume your initial loan balance is $150,000 with an interest
rate of eight percent. During the first year you would pay $9969.27 in
interest. If your first payment is January 1st, your taxable
income would be almost $10,000 less – due to the IRS interest rate
deduction. Property taxes are deductible, too. Whatever property taxes you
pay in a given year may also be deducted from your gross income, lowering
your tax obligation.
Stable Monthly
Housing Costs
When
you rent a place to live, you can certainly expect your rent to increase
each year – or even more often. If you get a fixed rate mortgage when
you buy a home, you have the same monthly payment amount for thirty years.
Even if you get an adjustable rate mortgage, your payment will stay within
a certain range for the entire life of the mortgage – and interest rates
aren’t as volatile now as they were in the late seventies and early
eighties.
Imagine
how much rent might be ten, fifteen, or even thirty years from now? Which
makes more sense?
Forced Savings
Some
people are just lousy at saving money, and a house is an automatic savings
account. You accumulate savings in two ways. Every month, a portion of
your payment goes toward the principal. Admittedly, in the early years of
the mortgage, this is not much. Over time, however, it accelerates.
Second,
your home appreciates. Average appreciation on a home is approximately
five percent, though it will vary from year to year, and in some years may
even depreciate.. Over time, history has shown that owning a home is one
of the very best financial investments.
Freedom
& Individualism
When
you rent, you are normally limited on what you can do to improve your
home. You have to get permission to make certain types of improvements.
Nor does it make sense to spend thousand of dollars painting, putting in
carpet, tile or window coverings when the main person who benefits is the
landlord and not you.
Since
your landlord wants to keep his expenses to a minimum, he or she will
probably not be spending much to improve the place, either.
When
you own a home, however, you can do pretty much whatever you want. You get
the benefits of any improvements you make, plus you get to live in an
environment you have created, not some faceless landlord.
More Space
Both
indoors and outdoors, you will probably have more space if you own your
own home. Even moving to a condominium from an apartment, you are likely
to find you have much more room available – your own laundry and storage
area, and bigger rooms. Apartment complexes are more interested in
creating the maximum number of income-producing units than they are in
creating space for each of the tenants.
If
you are moving to a home for the first time, you are going to be very
pleased with all the new space you have available. You may have to even
buy more "stuff."
Need a Home
Loan? Contact: BorrowToday.com
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