Finance Blog
Hidden Benefits of Buying a Home
When weighing your options for buying a home, you may hear the same criteria: Have you saved enough money for a down payment? Can you afford the expenses associated with owning a home? Are you going to stay in the home for a short period of time or is this home a place you intend on living in for years to come? Can you qualify for a mortgage?
If you are considering the benefits of home ownership, some of those benefits are missed by homebuyers when considering their options.
Tax deductions when you own a home
Mortgage interest tax deduction. First-time homebuyers may be pleasantly surprised when they file their personal income taxes after they purchase a home as their primary residence. The interest payments they have made to their lender are fully deductible. When you start making mortgage payments, almost the whole loan payment consists of interest. In the early years, you pay little principal back on the loan. If you have an equity loan on that primary residence, you can also deduct interest paid to the lender on loans up to $100,000.
Property tax deduction. In addition to the mortgage interest tax deduction, you can also deduct on your federal income taxes your real estate tax payments associated with your primary residence. IRS Publication 530 has more information about how to deduct your property taxes. And, for now, it seems that Congress will continue the mortgage interest tax deduction and the real estate property tax deduction.
Buying a home with extra perks
Buying a historical property. Buying a historical home has its pros and cons. You may be able to buy a home with history and heritage, but you may have to pay quite a bit more to renovate and keep up with home maintenance. If your historic home is in an historic district, you may have other limitations on what you can do with your home and how you must maintain the home. There may be a federal tax credit and state tax credit available to owners of historic property. In some parts of the country, if you own a historic home, you may be able to get a real estate tax benefit from your local tax assessor’s office. Thirty states now offer state rehabilitation tax credits for historical properties. Keep in mind that you may have to comply with certain building standards to keep and maintain historic property to receive a tax benefit. If you’re willing to put in the work to maintain a historical home and restore it to its original beauty, you may benefit financially. Start your search for a historic home with the National Trust for Historic Preservation.
Buying in a community targeted by state or federal governments for redevelopment. One of the most important rules of real estate is Location, Location, Location. In some cases, you can benefit by finding a neighborhood that has the backing of the federal or state government. Some government agencies will give lenders incentives to have them lend money in certain communities and neighborhoods. If you can qualify for these benefits, you might find that the interest rate on your loan is below market or that some of the closing costs associated with your purchase are covered by the lender or the governmental agency. The Community Reinvestment Act is a federal law that encourages lenders to meet the needs of borrowers in low- to moderate-income communities and the location of some of these properties can be targeted under specially designated census tracts. Talk to your mortgage broker or real estate agent to find out if you can look at homes in these census tracts.
Additional benefits of home ownership
Building Equity. At the beginning of the life of your loan, you will be paying most of your payment to interest. But every month, that balance will shift and you will be paying more of your payment toward principal and less to interest. Instead of paying rent to a landlord, you will be making the payment toward your investment in equity. While the last decade has not been a good one for homebuyers, historically, when you make your monthly payments, you will find that your loan balance decreases and you increase equity in your home.
Freedom of being a homeowner. If you look at rental listings you might find such criteria as “no pets” or “no painting.” Owning your own house gives you the freedom to make your home into whatever you want it to be, and the satisfaction that comes with building a home. You can make changes and upgrade your home, building more of an investment in your future and being the king or queen of your castle.
READ MORE:
Buyer’s Market Q & A with Real Estate Expert Ilyce Glink
Housing Market Predictions-Why Aren’t People Buying Houses?
Housing Market Predictions—A Triple Dip in Home Prices?
Home Maintenance Checklist for the Fall
Money Management Tips: When Celebrities Make Money Mistakes
Home Buying: The Low Down on No Down Payment Mortgages
Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com and at the Home Equity blog for CBS MoneyWatch.
6 comments
Leave a Comment
We welcome your interest and participation on this forum, but be aware that comments will be published at Equifax's sole discretion. Please don't use this blog to submit questions or concerns about your Equifax credit report or raise customer service issues. Instead, you should contact Equifax directly for all such matters and any attempts to do so in this forum will be promptly re-directed.
Some other factors to consider when commenting:
- Registration and privacy. While no registration is required to visit our forum, participants wishing to post a message must register by creating an account. All personal information provided by forum members incident to registration is governed by our Terms of Use and Privacy Policy.
- All comments are anonymous. We'll delete your name, e-mail address, and any other identifying information, including details about your investments.
- We can't post or respond to every comment - As much as we'd like to, we can't post every comment, nor can we guarantee that we will respond to each individual message. All questions or comments about your Equifax credit report or similar customer service issues should be handled by contacting Equifax directly.
- Don't offer specific legal, tax or financial advice. All of the materials on this Site are for information, education, and noncommercial purposes only and this forum is not intended as a means of expressing views or ideas regarding any specific legal, tax, or investment advice. While offering general rules of thumb is both permitted and encouraged, recommending specific ideas or strategies regarding investments, taxes, and related matters is prohibited.
- Credit Repair. This blog is not intended as a venue for the discussion or exchange of ideas regarding credit repair or other strategies intended to assist visitors and community members improve or otherwise modify their credit histories, ratings or scores.
- Stay on topic. Your comment should be concise and pertain to the specific post in question.
- Be respectful of the community. The use of profanity, offensive language, spam, and personal attacks will not be tolerated and egregious or repeat offenders will be banned from future participation. We encourage disagreement and healthy debate, but please refrain from personal attacks on our WordPresss and contributors.
- Finally: Participation in this forum may be terminated by Equifax immediately and without notice for failure to comply with any guidelines or Terms of Use. As such, you should familiarize yourself with all pertinent requirements prior to submitting any response through the blog or otherwise. All opinions expressed in this forum are solely those of the individual submitting the comment, and don't necessarily represent the views of Equifax or its management.
Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.
RSS Feeds
All of the benefits of home ownership are summed up in pride of ownership, forced savings, and a hedge against inflation. Mortgage interest deduction is not really of any benefit in the larger picture. For example, in Canada there is no mortgage interest deduction for a primary residence. However if you bought for $100000 and sold for $1000000 you pay no tax on the appreciation. That is a real benefit. Furthermore real estate values are not suffering in Canada as a result of more conservative lending policies and lack of a mortgage interest deduction. In our country, the mortgage interest deduction for the average middle class couple is not a significant amount greater than the standard deduction for a couple and should only be considered in that vein. If Americans really understood the deduction pros and cons they would happily opt to trade the deduction for the Canadian unlimited tax benefit at point of sale.
Of course if you live by the above you will also have appreciation over time and not be forced to sell in a down market.
Equifax should include the EQUITY value of primary/ homestead residences in consumers’s credit file, once the mortgage lien is paid down significantly (50% equity & +) & once the homestead is free & clear of any lien or claim (ie. ‘paid off’ ).
Equifax prominently – famously – includes the value of loans – patic the value of mortgage liens in consumer’s credit file. Why cannot Equifax include significant equity values of primary residences ? Systematically excluding consumer’s equity in its analysis of consumer’s credit score would be unjustified economic discrimination.
Equifax weighs unused credit card capacity in calculating credit scores via its ‘algorithm.’ So, Equifax should be comfortable recognizing consumer’s home equity in calculating credit scores, because in today’s high-tech world home equity is as easily verified as (is) a consumer’s unused credit card capacity.
Home equity deserves inclusion in Equifax’s algorithm, as Home Equity is not just a good measure of ‘capacity,’ home equity is also a good measure of ‘character.
Upon paying off one’s mortgage, why shouldn’t Equifax enter the Mortgage Discharge in the consumer’s credit file ?
The Mortgage Discharge is in Public Record, having been registered in the County Register of Deeds office. The Mortgage lien was entered in the consumer’s credit file, way should not Equifax include the Mortgage Discharge in the credit file as well?
Future lenders/ creditors find mortgage discharges valuable information when the are considering loan applications.
And once off, the Mortgage Discharge is in ones credit file, having been filed county Deeds Office (ie. the public record). The Mortgage Discharge is valuable info to have when one applies for credit/ loans in the future.
Equifax should include the Mortgage Discharge in your credit file, as its the ‘flip side’ of the Mortgage Lien…