Deciding to Buy

Why Do You Want To Buy A New Home? Are you tired of paying rent? Have you outgrown your current home? Do you need more space - either additional bedrooms for a growing family or a home office so you can tele-commute? Would you like a larger yard or would prefer a more low-maintenance home? Would you rather live in a different area? Is your goal to move closer to work, schools, or family? Having a clear sense of your reasons for buying a new home will help you to clarify your goals, establish a clear game plan, and choose the right home.

Home Ownership as an Investment. In addition to finding a property that meets your needs and provides you with comfort and a place to call home, home ownership has proven to be a very good investment. As you pay down the principal part of your home mortgage, and your home increases in value over time due to market appreciation, you are building “equity” in your home. Equity refers to the difference between what your home is worth and what you still owe on it. Each month, as you pay your mortgage, your equity increases. For this reason, home ownership is sometimes referred to as a “forced savings plan.” Forced, in the sense that you must pay your mortgage each month and as you do so, you are gradually paying down the principal debt that you owe on your home, thereby increasing your equity. The equity or “savings” will be realized when you sell your home or possibly sooner, since many home owners borrow against their equity to pay for other major life expenditures (a child's college tuition, a wedding, a vacation, a new car, etc.).

In addition to building your equity over time, home ownership can offer excellent tax benefits. The interest that you pay on your home mortgage is currently, and has been for many years, deductible from your income, thereby reducing you annual income tax burden and allowing you to bring home more of your salary. Many home buyers find that, with this tax benefit, they can actually afford a larger home than they anticipated, since their income effectively increases as a result of home ownership.

Another current benefit of home ownership is that if you sell your home and make a profit on it, you may not be subject to capital gains taxes if your profit does not exceed a certain amount. This same advantage is one that is not available for most other investment vehicles. To learn more about the tax benefits associated with home ownership, you should consult your tax advisor.

For more information and for any additional questions, please feel free to contact me at any time.

© Nadia Nejaime, 2006