The declining economy has dramatically changed the housing market in the past two years, but if you are qualified and looking to buy a new home, this could be the best time to do so. Interest rates are at historic lows, house prices have declined more than 30%, and there is an abundant supply of homes. Additionally, there are many government incentive programs for first time home buyers such as the $8,000 tax credit if you buy your home before December 1, 2009. There are certain limitations to be eligible for this credit, so feel free to check with Haj Financial regarding your qualification. Further advantages of buying a home versus renting include the following:
- Buying a home is a long-term investment. When you buy a home you are building equity and from the very first day you buy your home you already have assets. For example, at the current rates, if you buy a home with a $200,000 mortgage at 5% interest for 30 years your monthly payment, including insurance and taxes, will be approximately $1,500. Keeping the home for 30 years will amount to equity of more than $600,000. On the other hand, if you were paying $1,500 a month in rent, for a similar home, over a 30 year period you would pay $540,000 with absolutely no equity.
- By becoming a homeowner you can save thousands of dollars on your annual tax returns. Homeowners can deduct interest paid on their home and real estate taxes paid annually. Whereas paying rent will not provide you any type of savings on your federal tax return.
- If you live in the home you own for a certain number of years, you will not have to pay any taxes on capital gains amounting up to $250,000 ($500,000 if you are filing married filed jointly), if you are selling your home. Renting, however, does not provide any such benefits.
- Homeownership is something to be extremely proud of, and you have the freedom of doing what pleases you in the home. While renting you have many restrictions imposed by your landlord, and you are under his mercy if he wants to raise the rent or evict you.
- Through homeownership you become part of a community.
There are some disadvantages of owning a home. For example if you need or enjoy staying on the move, renting gives you the freedom to move easily. It may not be so easy to sell the home you own if you need to move. Also, owning a home can be costly when it comes to repairs. Homes do require repairs and maintenance which can sometimes be costly. If you are renting however, the landlord will usually be required to take care of such work.
Nevertheless, buying a home at this time might be a very good idea, because if inflation were to go up to double digits it would be extremely difficult for anyone to afford a home. As always though, before investing and buying real estate you need to be informed and seek the proper guidance of professionals in the field who can help direct you through the process of choosing your dream home. Adnan Elhaj is always ready to help in this process.
Recent Comments