Carol Lollich, Broker-Owner
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For most people, buying a home is one of the most important decisions of their lives. The decision is not usually an easy one. But, trends in home prices and mortgage rates, combined with the tax advantages of home ownership, make this an excellent time to turn the home of your dreams into a reality.
Buying vs. Renting
If you're thinking of buying a home, you've probably already asked yourself, "Can I afford to buy?" Another good question to ask is, "Can I afford to continue renting?"
Rental payments are gone, once you make them. But with each mortgage payment, you are "buying" something tangible, building up equity. The longer you own your own home, the larger your equity.
There are, however, maintenance expenses and property taxes you will have as an owner, that were not your responsibility as a renter. (These were probably reflected in your rental costs, but not identified.) If you purchase a condominium, exterior maintenance is usually included in a monthly Homeowner's Association Fee, but you still have the responsibility of maintaining the interior.
A home is an investment that helps you keep up with inflation. Although not all homes appreciate at the same rate and some years are better than others, real estate has historically kept pace with and usually appreciated faster than the rate of inflation.
Keep in mind, too, that through the years, your income most likely will increase faster than any increase in your mortgage payment. Rent payments, on the other hand, tend to increase ...right along with your paycheck.
As a rule of thumb, a one point drop in mortgage rates means that half a million more families will qualify for affordable financing. Yours could be one of them!
Rates for conventional, 30-year fixed rate mortgages are now in a reasonable range. Increasingly popular alternate forms of financing may make your loan even more affordable. Your real estate broker can provide information on the types of mortgage plans available to you.
Homeowner Tax Advantages
When you're figuring out how much you can afford to commit to monthly mortgage payments, don't forget the tax advantages of home ownership.
Both property taxes and interest payments on a mortgage for an owner-occupied home are currently tax-deductible. In the early years of a typical mortgage, all but a small percentage of each monthly payment is used to pay off the interest on the loan. This means that as a homeowner, your annual taxable income could be substantially reduced by deducting the payments you make on property taxes and yearly mortgage payments.
And, later on, should you decide to take advantage of the growing equity in your home by taking out a home equity loan, the interest on up to $100,000 of home equity indebtedness is tax deductible.
You Can Make Home Ownership a Reality
Take a good look at your personal financial situation in comparison to housing price trends and mortgage plans available in the community you'd like to live in. You will probably discover that you are closer to home ownership than you realized. And that, in fact, this is the time you've been waiting for.