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THE 7 TOP REASONS TO OWN YOUR HOME:
1. Tax breaks. The U.S.
Tax Code lets you deduct the interest you pay on your mortgage, your
property taxes, as well as some of the costs involved in buying your
home.
The tax deductions you’re eligible to take for mortgage interest
and property taxes greatly increase the financial benefits of
homeownership. Here’s how it works.
Assume, for example:
$9,877 = Mortgage interest paid (a loan of $150,000 for 30 years,
at 7 percent, using year-five interest)
$2,700 = Property taxes (at 1.5 percent on $180,000 assessed value)
______
$12,577 =
Total deduction
Then, multiply your total deduction by your tax rate.
For example, at a 28 percent tax rate: 12,577 x 0.28 = $3,521.56
$3,521.56 =
Amount you have lowered your federal income tax (at 28 percent tax rate)
Note: Mortgage interest may not be deductible on loans over $1.1
million. In addition, deductions are decreased when total income reaches
a certain level.
2. Appreciation. Real estate
generally has a long-term, stable value increase. While year-to-year
fluctuations are normal, median existing-home sale prices have increased
on average 6.5 percent each year from 1972 through 2005, and increased
88.5 percent over the last 10 years, according to the NATIONAL
ASSOCIATION OF REALTORS®. In addition, the number of U.S. households is
expected to rise 15 percent over the next decade, creating a continued
high demand for housing.
3.
Equity. Money paid for rent is money that you’ll never
see again, but mortgage payments let you build equity ownership interest
in your home.
4.
Savings. Building equity in your home is a ready-made
savings plan. When you sell, you can generally take up to $250,000
($500,000 for a married couple) as capital gain without owing any
federal income tax.
5.
Predictability. Unlike rent, your fixed-mortgage
payments do not rise over time. Your housing costs may actually decline
as you own the home longer. Keep in mind, however, that property taxes
and insurance costs will increase.
6.
Freedom. The home is yours. You can decorate any way you
want and benefit from your investment for as long as you own the home.
7.
Stability. Remaining in one neighborhood for several
years gives you a chance to participate in community activities, lets
you and your family establish lasting friendships, and offers your
children the benefit of educational continuity.
Online resources: To calculate whether buying is the best financial
option for you, use the “Buy vs. Rent” calculator at
www.GinnieMae.gov.
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