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Why Buying a Home is a Good
Idea
Income Tax Savings
Because of income tax deductions, the government is
subsidizing your purchase of a home. All of the 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 the 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 the IRS interest rate deduction.
Property taxes are deductible, too. Whatever property taxes
you pay in a given year may also be deducted from your gross
income, lowering your tax obligation.
Stable Monthly Housing Costs
When you rent a place to live, you can certainly expect your
rent to increase each year – or even more often. If you get a
fixed rate mortgage when you buy a home, you have the same
monthly payment amount for thirty years. Even if you get an
adjustable rate mortgage, your payment will stay within a
certain range for the entire life of the mortgage – and
interest rates aren’t as volatile now as they were in the
late seventies and early eighties.
Imagine how much rent might be ten, fifteen, or even thirty
years from now? Which makes more sense?
Forced Savings
Some people are just lousy at saving money, and a house is an
automatic savings account. You accumulate savings in two
ways. Every month, a portion of your payment goes toward the
principal. Admittedly, in the early years of the mortgage,
this is not much. Over time, however, it accelerates.
Second, your home appreciates. Average appreciation on a home
is approximately five percent, though it will vary from year
to year, and in some years may even depreciate.. Over time,
history has shown that owning a home is one of the very best
financial investments.
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