Homebuying June 20 2018

Why Owning a Home Makes Financial Sense

In the debate of owning vs. renting, why have experts agreed that paying a mortgage is the smarter money move? On a national basis, buying a home is 37.7 percent cheaper than renting. Your location and type of home (and the length of your mortgage terms) will all influence cost, but owning a home makes the most financial sense if you plan on living in one place for at least seven years. Mortgage loans are more affordable than ever before, so as a kindness to your piggy bank, read the tax breaks you can expect as a homeowner when you itemize your taxes.

Mortgage Interest Deduction

Most of your monthly mortgage payments will go towards interest in your first few years of homeownership. You can deduct that interest from your taxes if your loan is $1 million or less.

Point Deduction

A discount point costs 1 percent of your loan amount and gets you a lower interest rate as a home buyer. Any points that you paid your lender to secure your mortgage can be deducted as interest if the points are equal to your down payment.

Property Taxes

Any taxes you pay to the government on your property are deductible from federal income tax. This does not include payments into your escrow account.

What does Escrow mean?

Mortgage Insurance Premium Deduction

If you paid less than 20 percent of a home’s cost for your down payment, you most likely pay a premium for mortgage insurance. For mortgages issued in 2007 and beyond, you can deduct that premium from your federal income taxes on an income up to $109,000, or $54,000 if you and your spouse file separately.

Energy Credit

You can earn a tax credit up to $500 (or 10 percent of the cost) for any energy-saving improvements made on your home. Every dollar lowers your tax bill by the same dollar amount. If you invest in more expensive home additions, such as solar-powered generators, you can earn a tax credit up to 30 percent, with no dollar limit.   While saving money is among the best reasons for owning a home, another is that you also build equity. This means you’re working toward ownership instead of paying rent into your landlord’s mortgage. In other words, you’re no longer paying for someone else’s dream and you’re earning the creative license to garden, paint, and upgrade appliances without permission. Yes, renting is a lot more flexible—you can sublease as easily as posting to Craigslist and you’re not responsible for any maintenance costs. But if you’re seeking stability and tax advantages, you should consider buying a home.  

Speak to Loan Officer

  Sources: https://www.lennar.com http://www.wisebread.com https://www.nytimes.com https://www.nar.realtor https://turbotax.intuit.com  

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