The Best Investment
As a fairly general rule, homes appreciate about four or 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 easily earn over
same return with a very safe investment in treasury bills or bonds.
But take a second look...
Presumably, if you bought a $200,000 house, you did not pay cash for 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 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 interest on your mortgage and your property taxes are both tax deductible, government is essentially subsidizing your home purchase.
Your rate of return when buying a home is higher than most any other investment you could makeIncome Tax Savings
Because of income tax deductions, government is subsidizing your purchase of a home. All of 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 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 IRS interest rate deduction.
