Buying Your Home - Tax Considerations
When is the best time to buy?
Here are some frequently
cited reasons for buying a house:
* The mortgage
interest deduction can make home ownership very appealing.
* You are not
counting on price appreciation in the short term.
* You can afford the
monthly payments.
* You plan to stay in the house long enough for the
appreciation to cover your transaction costs. The costs of buying and selling a
home include real estate commissions, lender fees and closing costs that can
amount to more than 10 percent of the sales price.
* You prefer to be an
owner rather than a renter.
* You can handle the maintenance expenses and
headaches.
* You are not greatly concerned by dips in home
values.
How do you
choose between buying and renting?
Home ownership offers tax benefits as
well as the freedom to make decisions about your home. An advantage of renting
is not worrying about maintenance and other financial obligations associated
with owning property. There also are a number of economic considerations. Unlike
renters, home owners who secure a fixed-rate loan can lock in their monthly
housing costs and make prudent investment plans knowing these expenses will not
increase substantially. Home ownership is a highly leveraged investment that can
yield substantial profit on a nominal front-end investment. However, such
returns depend on home-price appreciation.
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