Purchasing a home is a major emotional and financial decision. Often times, people want to buy a home; however, emotionally cannot afford to commit to
home-buying process. They are, in fact, afraid. “My payment will be too high” or “What if I lose my job,” are some of
“excuses” which I often hear. People do not realize that they are able to meet all
commitments over their life span. In any event, when everything is said and done, here are some of
major advantages of buying a home:
1. Quality of Life. Home-buying and living in your home affects
quality of life. It adds to your confidence, giving you a sense of pride and satisfaction. You have a sense of emotional well-being as well as peace of mind.
2. Tax Deductibility of Mortgage Interest. The entire mortgage interest payment is tax-deductible and
“net” cost of
mortgage payment actually puts money in your pocket.
3. Tax Deductibility of Property Taxes. Similarly,
property taxes are due and payable twice a year and may seem like a lot of waste of money. Typically, property taxes are $1.10/$1,000 of your purchase price. However,
property taxes are also tax deductible and you get it back in
form of tax savings.
4. Appreciation Potential. Typically and historically, nationwide property values have gone up in value at 7% per year. In California and some other states, properties have, in certain good economic times, appreciated at
rate of over 20% per year. At 7% conservative rate,
property doubles up in value in 10 years. So, a property worth $500,000 will be worth $1,000,000, equaling a gain of $50,000 on a yearly basis. For an average person, it is difficult to save that kind of money.
5. Deferred Capital Gain Treatment. Real estate investment capital gains can be deferred by exchanging
property for like-kind property. So, when
property appreciates and you decide to sell it and do no want to pay
capital gains tax, you can buy another property of like-kind and avoid capital gains tax. This allows you to switch properties when required, for example, an area might be facing downturn or you might be moving, etc.