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6 Reasons to Buy a Home

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First of all, here in the South Bay you have to ask yourself, “Who doesn’t want to live here?”   There are many other reasons to buy a home – here are 6 good ones!

Pride of Ownership – One of the main reasons people buy and always have bought homes is pride of ownership.  Part of the “American dream is owning your own home.”  Making it yours – decorating it your way, landscaping w/ your favorite plants,  painting it your favorite colors, etc.  Most of us grew up with our families in our “family home.” 

Good Investment – Although home prices are cyclical, sometimes up, sometimes down, overall they appreciate or go up.   For example, if you use the Office of Federal Housing Enterprise Oversight’s house price calculator,” a home purchased in California in the 1st quarter of 1975 for $75,000 is worth approximately $1,017,400 in the 1st quarter of 2008.  That’s not a bad savings plan since you had to live somewhere!

Tax Benefits – owning a home in the United States is looked upon favorably by our Federal government.  With that said the government offers quite nice tax benefits to those who also own a mortgage.  The mortgage interest you pay each month is deductible and typically the interest is the largest part of your mortgage payment – especially in the early years….when you need the most help.

Capital Gains Exclusions – (another tax benefit) – As long as you have lived in your home for two of the past five years, you can exclude up to $250,000 for an individual or $500,000 for a married couple of profit from capital gains. You do not have to buy a replacement home or move up. There is no age restriction, and the “over-55” rule does not apply. You can exclude the above thresholds from taxes every 24 months, which means you could sell every two years and pocket your profit–subject to limitation–free from taxation.

 Equity Building – As you pay your mortgage, an amortizing mortgage, slowly you pay more and more of the principle off.  The beginning years of an amortizing mortgage are mostly interest, as noted above, but the last part of the term is mostly principle.  You are basically paying into your own bank account as every time you pay your mortgage the principle gets reduced….you can’t do that with rent.  (You are helping pay down someone else’s mortgage then.)

Equity Loans – Consumers can borrow against a home’s equity for a variety of reasons such as home improvement, college, medical or starting a new business.