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Why Buying Home Is A Good Idea
By Ajay Pats, Fri Dec 9th
/p> The Best Investment As a fairly general rule, homes appreciate about four or fivepercent a year. Some years will be more, some less. The figurewill vary from neighborhood to neighborhood, and region toregion. Five percent may not seem like that much at first. Stocks (attimes) appreciate much more, and you could easily earn over thesame return with a very safe investment in treasury bills orbonds.
But take a second look... Presumably, if you bought a $200,000 house, you did not pay cashfor the home. You got a mortgage, too. Suppose you put as muchas twenty percent down - that would be an investment of $40,000. At an appreciation rate of 5% annually, a $200,000 home wouldincrease in value $10,000 during the first year. That means youearned $10,000 with an investment of $40,000. Your annual"return on investment" would be a whopping twenty-five percent. Of course, you are making payments and paying propertytaxes, along with a couple of other costs. However, since theinterest on your and your property taxes are both taxdeductible, the government is essentially subsidizing your homepurchase. Your rate of return when buying a home is higher than most anyother investment you could makeIncome Tax Savings Because of income tax deductions, the government is subsidizingyour purchase of a home. All of the interest and property taxesyou pay in a given year can be deducted from your gross incometo reduce your taxable income. For example, assume your initial loan balance is $150,000 withan interest rate of eight percent. During the first year youwould pay $9969.27
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in interest. If your first payment is January1st, your taxable income would be almost $10,000 less - due tothe IRS interest rate deduction. Property taxes are deductible, too. Whatever property taxes youpay 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 yourrent to increase each year - or even more often. If you get afixed rate when you buy a home, you have the samemonthly payment amount for thirty years. Even if you get anadjustable rate mortgage, your payment will stay within acertain range for the entire life of the - and interestrates aren't as volatile now as they were in the late seventiesand early eighties. Imagine how much rent might be ten, fifteen, or even thirtyyears from now? Which makes more sense? Forced Savings Some people are just lousy at saving money, and a house is anautomatic savings account. You accumulate savings in two ways.Every month, a portion of your payment goes toward theprincipal. Admittedly, in the early years of the mortgage, thisis not much. Over time, however, it accelerates. Second, your home appreciates. Average appreciation on a home isapproximately five percent, though it will vary from year toyear, and in some years may even depreciate.. Over time, historyhas shown that owning a home is one of the very best financialinvestments About the author:Ajay Pats is a professional manager.He runs real estate brokingsitehttp://realestatebroker.nexuswebs.net/realestatebroker/index.html,community for home based business entrepreneurshttp://groups.msn.com/venturecon and inspirational ezinehttp://www.topica.com/lists/venturemall .
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