Do your upstairs neighbors stomp on your ceiling? Do the meatballs
they're cooking next door fill your apartment with the smell of searing
meat? Perhaps you long to sit quietly in your own backyard after a long
day. Buying a home is a big step, but maybe you're closer than you
think.
For the vast majority of us, owning a home is part of the American
Dream. According to a study conducted by the NATIONAL ASSOCIATION OF
REALTORS¨, 87 percent of those polled cited owning a home as the number
one criterion for defining "the good life." Owners and renters
alike considered homeownership desirable for the following reasons: the
pride of ownership, their dislike of paying rent, and the ability to
change features of their homes to match their individual tastes and
needs.
Like Mom and apple pie, owning your own home provides a sense of
security and well-being that's hard to beat. Home is where we raise our
families, have friends over for summer barbeques, paint the baby's room
pink or blue, and find refuge from the outside world.
In addition to these intrinsic benefits, owning a home offers other
advantages as well. For instance, as a homeowner, you have control over
your environment. Not only can you change your home to meet your needs,
but you also aren't subject to the terms of a lease or a landlord. As a
homeowner, you can experience the emotional and financial security that
comes from knowing what your housing expenses will be from year to year.
Unlike rents, which can increase annually, most mortgages have fixed or
capped monthly payments. So, as a homeowner, you can have a much better
idea of what proportion of your paycheck goes toward your home. Think of
it as the ultimate savings plan--it sure beats a passbook.
Bottom-Line Benefits
And it only gets better. Homeownership is the primary component in
the creation of wealth for many Americans. (Data from Harvard
University's Joint Center of Housing Studies illustrate not only that
the median net wealth of homeowners is 34 times greater than that of
renters, but also that over half of that wealth is generated from home
equity.) As you pay down your loan amount each month, you accumulate
equity, a growing ownership interest in your property. If you need
funds, you can borrow against this equity in the form of a home equity
loan. Further, interest on a portion of home equity is tax deductible.
Remember, most homes appreciate in value over time and can be a
source of income for you, especially if you've lived in your house for
many years. When you retire, you can sell your home if you need the
funds or make use of a home equity conversion mortgage. This type of
mortgage allows you to continue to live in your home and receive a
monthly check at the same time. In essence you are able to tap into the
accumulated home equity and receive a monthly sum which reflects the
amount of that equity and the number of years you wish to receive that
payment. In return for providing you with the payments, the lender
receives an ownership interest in the home. These mortgages sometimes
are called reverse annuity mortgages. Ask your lender about them.
Finally, don't forget about the significant tax advantages of owning
your home. Interest on a home mortgage and property taxes are
deductible. For most of us, mortgage interest provides the largest tax
deduction. Also, a home is the single most important factor that
determines whether you will be able to file a return which takes
advantage of the wide range of allowable itemized deductions.
Homebuying Means Getting Back To
The Basics
Recently, the CALIFORNIA ASSOCIATION OF REALTORS¨ surveyed
homebuyers to find out what they considered to be important in the
purchase of their homes. The largest percentage, 27 percent, considered
the mere ownership of a home as the most important reason to buy. Moving
to a better neighborhood (17 percent), wanting a larger home (10
percent), and realizing the tax advantages of homeownership (8 percent)
were other reasons cited for buying homes. Seven percent focused on
investment value as their primary motivation for homeownership.
Over the years, your home likely will be the best investment you'll
ever make. But more important, it will be the place that offers you and
your family shelter, security and stability. That's some return on
investment.
Text used with permission of the California
Association of Realtors
The information presented on our site is deemed reliable but is not guaranteed
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