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If youre like most first-time home buyers I have met, youve probably had family, friends and coworkers giving you advice to buy a home. However, you may still wonder if buying a home now is the right thing to do. Having reservations is normal. The more you know about the pros and cons, and the better the Realtor guidance you have, the less scary the entire process will appear to you.
Here are a few reasons why you should buy a home now.
Real Estate is cyclical. Somewhat like the stock market, it moves in cycles, sometimes up, sometimes down, yet over the years, real estate has consistently appreciated. Many people view their home investment as a hedge against inflation. Some invest with the idea of using the profits for college, retirement, or moving up in home size later on.
2. Pride
Pride of ownership is a big factor for many. It means you can paint the walls any color you desire, have pets in most cases, hang pictures and decorate your home any way you like. Home ownership gives you and your family a sense of stability and security. In several studies it even shows children who are in a home ownership environment rather than a leasing environment do better in school. This will be the subject of a future article (so stay tuned!).
Home ownership can act as a tax shelter. In the case of mortgage interest, at the time of this article, as long as the balance is smaller than the price of the home then that interest is taken as a deduction on your tax return. In the earlier years of your loan the interest is a large portion of your monthly payment.
As long as you have lived in your home for two of the past five years, you can exclude up to 250,000 for an individual or 500,000 for a married couple of profit from capital gains. You do not have to buy a replacement home or move up. There is no age restriction, and the over-55 rule does not apply. You can exclude the above thresholds from taxes every 24 months, which means you could sell every two years and pocket your profit—subject to limitation—free from taxation.
Part of your monthly payment is applied to the principal balance of your loan, and as stated above, the rest is interest. The portion applied to the principal balance of your loan reduces your obligation to the lending institution. The principal portion of your payment increases slightly every month and the interest portion decreases. So, the principal portion is lowest on your first payment and highest on your last payment. Plus, if you make one extra payment a year, the amount of years left on your loan term may be reduced by several years. Ask your lender to give you an idea of how that will affect your loan, but most lenders tell me it could be anywhere around 3 years to 7 years depending on the individual terms.
To speak to a Realtor about how to proceed for your particular situation contact us HERE, or call us at 281-709-7047, or 832-580-8449 (this number also for Españiol)
