Sunday, September 27, 2015

5 Ways Buying a New Home Changes Your Personal Finances

The decision to purchase a home definitely affects your financial bottom line. The down payment alone may decimate what used to feel like a healthy savings. 

Stop and consider both sides of the process to find advantages that make it all worthwhile. Read through five ways that home purchases affect your personal finances. 

1. Tax Implications

On the whole, first-time homebuyers receive a variety of helpful-deductible options to give a bank account respite. Some of these deductions include:

  • Mortgage interest: although it may take more time to complete your tax return, you’ll find that it pays off. Whatever interest comes with your mortgage opens you up to certain helpful deductions in your overall tax payment.
  • Tax-deductible points: those who pay extra on their loan or “points” receive another chance for a tax deduction. Every point equals 1 percent of your home’s principal price. However many points you earn provide a tax-deductible percentage. Consult a tax expert to find out if you’re eligible. 
  • Private mortgage insurance: Those with a down payment that’s less than 20 percent of the purchase price usually require mortgage insurance. Although you might dislike this added cost, most private mortgage premiums qualify for additional tax deductions.

Regardless of which deductions you qualify for, make sure to consult a tax expert and the relevant official tax forms to ensure proper payment.

2. Reduced Spending Money

Those who buy a house often experience what’s referred to as feeling “house poor.” This term doesn’t refer to actual poverty, but rather a lack of extra cash due to the presence of a monthly mortgage payment.

Although your savings might feel a little reduced now, keep in mind that your home ownership adds greatly to your net worth, and even income potential. You are also gaining equity on your property as you make payments on your mortgage. 

Look at buying a new home this way, it is a large investment, but because you can put money and other things into it, you will eventually get back more than what you originally invested. Basically, you are paying yourself in a way because you own a home. Owning a home should also help you with your tax returns at the end of every year.

3. Lasting Payments

Unlike renters, homeowners make good use of every cent they pay towards their mortgage. While a renter-landlord relationship requires monthly payments that go into the landlord’s pocket, your monthly mortgage payments go towards the eventual ownership of your home.

True, mortgage payments might exceed your previous monthly rent payment, but the end result makes it all worth it. Homeowners who stay on top of their payments may end up owning their home and having access to equity, while renters never see any part of their payments again.

4. Various Expenses

On the other hand, renters may enjoy the convenience of one all-inclusive payment. Particularly in situations where landlords include utilities in the cost of rent, renters often have consolidated costs.

Homeowners pay for their own utilities, including water, gas, electricity, Internet, and garbage pick-up. And don’t forget about property taxes.

5. Home Loans

Although mentioned before, the presence of a mortgage creates a paradox for your finances. While your monthly loan payment might seem high, it’s the consistent payment that boosts your credit score and potential for future big purchases.

Remember that despite all the new expenses you might have, your financial persona now boasts of home ownership.

Informational Credit

The information in this article is credited to Sente Mortgage who specializes in home loans in Austin, Texas.

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