Pride of Ownership

There's not place like home. Taking pride in your home is one of the top reasons why people look towards purchasing a home. No landlord can tell you what color the bedroom must be, you can hang pictures, change cabinets, and even the layout. Owning a home gives a you a sense of stability and security. Homeownership is an investment in your future.

Appreciation

While the market may fluctuate in cycles, throughout the years real estate has consistently appreciated over the long term. To get a better view of this, take a look at the House Price Index put out by the Office of Federal Housing Enterprise Oversight. This data is broken down by region and metropolitan area.

Mortgage Interest Deductions

There are many tax benefits to home ownership. Your mortgage interest if fully deductible on your tax return if your mortgage balance is smaller than the price of your home. This can be very helpful due to the fact that interest is the largest component of your mortgage payment.

Property Tax Deductions

If you are a first-time home buyer, please read the IRS Publication 530. http://www.irs.gov/pub/irs-pdf/p530.pdf Assuming your property meets the requirements, taxes paid for your main home and a vacation home are fully deductible for income tax purposes. In order to receive a home mortgage deduction, your loan must be secured by a qualified home. This basically means your main home or your second home. According to the IRS, a home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. You can only have one main home at any one time.

Capital Gains

As long as you occupied your house as your primary residence for two of the past five years, you can exclude up to $250,000 for an individual or $500,000 in taxes for a married couple of profit from capital gains. As long as you were not applying this rule to another residence during those two years, you could potentially sell every two years with most or all of it free from taxation.

Preferential Tax Treatment

The government wants to encourage longterm homeownership. If you've owned your home for more than one year and receive more profit than the allowable exclusion when you sell your home, that profit will be considered a capital asset. If your sale qualifies you may be able to recieve preferential tax treatment. Consult your account for more details. Also see the IRS link: http://www.irs.gov/taxtopics/tc701.html.

Building Equity

When your monthly mortgage payment is applied, a part of it is applied to the principle balance effectively reducing the total amount you owe. This increases the “amount” of home that you actually own, which is called equity. Most loans are fully amortized, which means within in the first year, the majority of your payments are going towards interest. If possible, try to set up your payments to include a little extra each time to be designated towards the principle. This can decrease the longevity of the loan.