Purchasing a home in these economic times may seem a fool’s errand. In reality, a sound, long-term investment in real estate is anything but.
If you rent an apartment, consider that the roof over your head is never fully secure, as the owner of the property retains the right to request that you to vacate the premises at any time (by law, within 60 days of the initial notice), and for any reason. His soon-to-be-married daughter may have her eye on your apartment or the owner may wish to sell the property. Should a lease protect you, know that your protection is only legally binding until the expiration date of that contract. Also, the owner could raise your rent significantly, without warning, and on a whim. I once rented a very nice, roomy apartment whose owner advised me that her youngest son, who was planning to marry, wanted my apartment. Because I was such a good tenant, she would allow me to stay with a substantial increase in rent. Why such an increase? The money would help the owner’s son purchase his own home!
Unless you are the master or mistress of your own domain, other issues concerning your occupancy will always be, well, issues. You may not get enough heat in the winter. If the owner lives on the premises, she may deign to drop in on you without notice, just to see that you haven’t damaged her investment. Forbidding you to have pets, she might have dogs that bark incessantly. Or, she could decide to rip out walls and floors to renovate unoccupied units in the middle of the night, when you have to rise at 5 AM to get to work, simply because she is bored and needs a “project”. If you think I’m concocting these stories for the sake of this article, let me assure you, I am not: I am referring to the very same landlord as above!
With the son enjoying the fruits of my blood, sweat, and tears, my husband and I stepped up our efforts to locate a house here in the Garden State. It was one of the best decisions we have ever made as a married couple. The moment I wrote out the check for the first mortgage payment, I felt liberated. My husband and I had attained a fixed mortgage rate that we could afford, on a home that we loved, and we were no longer the victims of an obsessive, greedy landlord. Best of all, our hard-earned money was no longer being tossed down the never-ending drain of said landlady’s purse. Every mortgage payment built equity (monetary value) in our home. After twelve months of religiously timely payments, our credit score increased, enabling us to get an attractive interest rate on a new car.
Even in a soft economy, the value of real estate does not depreciate to a substantial degree, in the way that many other investments often do. And, the equity in your home is like a savings account delivering a far higher rate of return. Should you be downsized from your job and need to assume a second mortgage, you can refinance the house to get a lump sum of money (equity) to tide you over. Or, you can use the equity to build an extension onto your home, lay Italian marble tiles on your entire first floor, or otherwise improve the value of your home; thereby, increasing its resale value when you decide to sell the property.
You may even wish to pay off some high interest credit cards with a home equity line of credit; thereby, increasing your monthly cash flow. And, the interest paid out against home equity loans is tax deductible!
In addition to the boon of equity, those who own homes can reap advantages via a number of other tax deductions. The year that you purchase your home, you may claim as a deduction any prepaid taxes as well as points that you may have paid at the closing. As you pay off your mortgage, the property taxes paid to your local municipality and State will provide deductions on your federal income tax return. In essence, Uncle Sam will be paying a portion of your mortgage expenses. If you decide to use your home equity loan to renovate your house, know that many energy-efficient home improvements are often tax deductible.
The bottom line is that it pays, literally, to own your home.
