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Federal Tax On Interest Earnings From Savings Account Article
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The Benefits of a Mortgage – Tax Savings
from:So often renters think they can’t afford to buy a house. And, it’s true that the idea of coming up with a down payment can be quite daunting, but here are some reasons why you should save your pennies and save a down payment on a home. Owning a home can save you money and make you money in ways you may never have imagined.
It’s not that much money – First of all, a down payment on your first home is not really that much money. At most, you’ll have to come up with 10% of the purchase price plus some money for closing costs. But, even this figure can be reduced. There are lots of special programs for first home buyers that can reduce your closing costs to nearly nothing and there are even home loans that require no down payment. Keep your credit squeaky clean – and once you’ve saved about 5% of your home budget, start looking around. It’s likely that your monthly mortgage payment will be no more than what you’re paying in rent.
Your mortgage tax savings – One of the biggest benefits of owning a home is your mortgage tax savings. You can deduct the interest you pay on your mortgage from your taxes each year. In the early years, especially, your mortgage tax savings are significant, because most of your mortgage payments are going to pay interest. As your mortgage matures, more of the money will go to principal, but even in later years, you’ll have some mortgage tax savings.
You’re building equity – In addition to your mortgage tax savings, each year that you own your home you’re building equity. By paying down the mortgage, you’re building cash equity. You can even borrow against this equity by taking out a home equity line to pay off other debt or make improvements to your home. And, the interest on home equity loans is tax deductible, too. So, paying off your other debts with your home equity loan makes great financial sense, because your interest rate is lower and you’re seeing tax savings.
You’re realizing the appreciation of the real estate market – Of course, you’re building equity by paying down your mortgage. However, in most cases, you’re building equity faster because of how quickly the real estate market is appreciating. Historically, the real estate market has been an excellent investment, often growing by 15% in a single year. So, owning a home is a great way to make money, too.
As you can see, there are many financial benefits to owning a home. Check out the first time buyer programs in your area and see how you can get into a home of your own.
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