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Advantages of Owning a HomeWhen the grass needs mowing, the teen next door is practicing his heavy metal band till midnight, and you find out the hard way that the neighbors dog is using your yard for a waste depository, would be an opportune time for you to review the advantages of owning your own home. Not everyone buys a home and spends the rest of their days in suburban bliss. Owning a home is not for everyone, but many feel the advantages of owning a home, far outweigh the alternatives.
Tax SavingsThe advantages of owning a home are many, but the most obvious advantage is tax savings. The U.S. government has taken away many of the tax deductions that we had grown accustomed to taking, but they have left tax breaks on the family home intact. In fact, it is one of the few deductions that you can still look forward to each April 15. The IRS allows you deduct almost all of the mortgage interest you pay toward the purchase of a home. In years past, credit card interest, automobile interest, and other interest charges were an allowable deduction. Your home is one of the few tax shelters most people can continue to use. Many lending institutions now offer 2nd mortgage loans which allow you to purchase automobiles or transfer credit card debt to your mortgage, which allows you continue to deduct these interest charges. Tax savings can be significant.
In addition, property taxes that you pay are deductible, as well as points and closing costs on a new home loan. For an average home these deductions can amount to $10,000 per year or more. This is a significant tax saving. A Home is a Savings AccountBuying a home is like having a savings account, but the interest rate paid to you is about three to five times the amount that most banks will pay you to hold your money. Buying a home is very much like a forced savings account, except you do not have the option of not making a deposit each month. A portion of your savings deposit (each month) goes toward interest (which is returned at tax time), but the home continues to increase in value, so for every dollar you pay, you earn another 15-20 cents as a result of increased value. I remember in 1993, I built an average home for about $140,000 for about $46 per square foot. The three houses around me sold (13 years later) for $96 per square foot. Over the 13 year period every dollar I paid was returned to me at about $2.10 to $1 return rate. I kind of feel like Forrest Gump. If only my Qualcomm stock had done so well. Fixed Housing CostsAs I look toward the end of my mortgage term, my monthly mortgage payment will remain the same, as it has for the last 13 years. The apartment I lived in, while I was building my home rented for a stiff $500 per month in 1993. This same apartment now rents for over $900 per month and I don't think the carpet has been changed since I moved out on that cold February day. A home mortgage amounts to fixed housing costs. If taxes go up, I change political parties (The bums need to be tossed out every 13 years or so anyway). If an appliance breaks down, I replace it with a newer, better one- maybe even one with a brain that makes my life easier.
Owning a home is the most certain method of controlling your fixed housing costs. Of course there's always the military. Building Equity/ Investment PotentialWhile we mentioned buying a home is like a forced savings account, we skirted the issue of investment potential, paying down a mortgage, owning a larger share of your homes value, and increasing value is called building equity. The appreciation of equity in a home is one of the easiest and most successful wealth strategies available to you. Higher Credit RatingNothing enhances your credit history like home ownership. Financial institutions smile favorably on home owners. After qualifying for a mortgage, you will find credit cards are easier to obtain and automobiles are easier to purchase. Besides the obvious financially related reasons, the psychological lift of owning your own home is an obvious positive factor. Your new home becomes your own space and you are free to make any alterations that you choose. Every new home owner that you speak to has grandiose plans for the changes they intend to make to their new home. Whether it is building a deck, installing a pool, building a game room, or planting a vegetable garden, every new homeowner seems to relish the future in their new home. Recently, I met a young couple at Home Depot, who were in the latter stages of building their own home. The young couple was pushing a shopping cart full of alterations that they had already planned for a home they had not even moved into yet. Being responsible for the destiny of your own home is a very gratifying experience. Inheritance and RetirementIn these times of ever increasing costs of consumer goods, high credit card debt, and wages that do not keep pace with inflation, many families can't seem to find a way to save for their retirement. Buying a home is one of the best ways to save for retirement. With my own home, in which I have lived for 13 years, the Value has increased from $140,000 when it was first built to more than $300,000. Many retirees may cash in the value of their home by putting it on the market, and downsizing to a condo or smaller home. They may use the cash for retirement or inheritance for their children. It seems harder and harder to work, pay expenses and debts, and build cash reserves for the future. For many, our home is the only legacy a parent can leave for our children. Buying a home is not only a legacy for children, but our grandchildren, and future generations. My Great Grand fathers saw this when they placed their name in the Georgia Land Lottery of 1827. My grandfather saw this more than 75 years ago, when he purchased two mules, a plow, and 40 acres, which he grew to more than 1000 acres. While I'm not sure where those two mules are buried, they remain intact as a legacy, along with the family farm. While I hope my children will never sell this land, the land and "home place" continue to be a lending collateral source for my great grandfathers descendants and their dreams for prosperity.
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Helton Genealogical DNA Project - Hilton Family Tree - http://hiltonfamilytree.com
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