Do you need reasons to buy a house? If you’re like most first-time home buyers, you’ve probably listened to friends’, family’s and coworkers’ advice. Most of which probably encourages you to buy a home. However, you may still wonder if buying a home is the right thing to do. Relax… 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.
Here are eight good reasons to buy a house.
1) Pride of 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 CD player, 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.
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Although the real estate market moves in cycles, sometimes up, sometimes down, over the years, real estate has consistently appreciated. Most economists state that the value of all money comes from real estate. The Office of Federal Housing Enterprise Oversight tracks the movements of single family home values across the country. Its House Price Index breaks down the changes by region and metropolitan area. Many people view their home investment as a hedge against inflation.
3) Mortgage Interest Deductions
Owning a property is a great tax shelter, and tax rates are in their favor. Sometimes, the desire for the pride of ownership can be eclipsed by the mortgage interest deduction. Mortgage interest is entirely deductible on your tax return as long as your mortgage debt is less than the cost of your home. Interest makes up the majority of your mortgage payment for a significant portion of the time that you are paying down your loan.
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4) Property Tax Deductions
IRS Publication 530 contains tax information for first-time home buyers. 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 Proposition 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.
5) Capital Gain Exclusion
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 do not have to buy a replacement home or move up. There is no age restriction, and the “over-55” rule does not apply. You can exclude the above thresholds from taxes every 24 months, which means you could sell every two years and pocket your profit–subject to limitation–free from taxation.
6) Preferential Tax Treatment
If you hold your home for more than a year and sell it for a profit that exceeds the permitted exclusion, that profit will be regarded as capital gains. Compared to income tax, capital gains are given preferential tax treatment. This implies that the taxable part will be substantially smaller than you might anticipate, even if your profit exceeds the exclusion.
Important Fact: The majority of taxpayers will only pay up to 20% in capital gains taxes. Comparatively speaking, the income tax rate is 22% or higher for the majority of taxpayers.
7) Mortgage Reduction Builds Equity
Your obligation decreases each month as a portion of your monthly payment is applied to the principle balance of your loan. Due to the way amortization works, each month you pay more toward the principal and less toward the interest. Your first payment will have the least amount going toward principal, and your last payment will have the most. With each payment, you accumulate greater equity the longer you own the property.
8) Equity Loans
Consumers who maintain balances on their credit cards are not allowed to deduct the interest, which can be as high as 18% to 22%. Interest on equity loans is frequently substantially lower. For many homeowners who have accrued some equity, using a home equity loan to pay off consumer debt makes sense.
The Tax Cuts and Jobs Act of 2017 abolished the ability to deduct interest paid on home equity loans from your taxes, unless you use the money to purchase, construct, or significantly enhance the property that serves as the loan’s security. Home equity loans may be prohibited by state law.
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8 Reasons to buy a house recap
Before making your first purchase, it is advisable to make sure you are prepared for the various obligations that come with home ownership. However, as you can see, it offers a lot of advantages. When thinking about purchasing your first house, be sure to balance the advantages and disadvantages.
Frequently Asked Questions (FAQS)
How can someone buy a house with no money down?
If you are eligible for a VA or USDA loan, there is no down payment required to purchase a property. You must fulfill service requirements and lender standards in order to be eligible for a VA loan. You must purchase a property in a designated rural area and meet income requirements to qualify for a USDA loan.
What credit score is required to buy a house?
Depending on the lender and loan type, different credit scores are required to buy a property. Although lenders may request a higher score, the minimum credit score requirement for FHA loans is 500. Although there is no minimum score requirement for VA loans, most lenders require a score of 620 or better. For a USDA loan, lenders require a score of at least 580, and for a conventional loan, they require a score of at least 620.