Watching the daily news, reading your local paper or perusing the web these days, we are inundated with news about the housing market. Most of it isn’t so pretty. We hear about research and trends, history and facts. The most common: “research has shown that renting has been less expensive than owning.” This week’s Mac Fact focuses on Home Ownership – dispelling the myth that home ownership is not out of your reach, nor a bad investment.
Today’s real estate market has created a fountain of readily available homes at greatly discounted prices, interest rates are at historic lows and down payment assistance programs abound. For example, MSHDA’s Homebuyer Assistance Grant Program which kicked off December 2012 has $15 million in funds available to assist first-time homebuyers with their home purchase. Non-military homebuyers are eligible for grants up to $3,000. Active military and veterans are eligible for grants up to $5,000. In today’s market, your mortgage payment is more than likely going to be lower than a rent payment.
Truth be told – in most areas in the country, renting is actually more expensive than owning a home and by owning a home; it is no more expensive than renting. When you decide to purchase a home, you are making the decision to replace RENT, which has no return on investment IN EXCHANGE for a house payment, which does give you a chance for a return. Studies have shown that if you invested the entire difference between the rent payment and mortgage payment you may have done better financially.
Now let’s move on to the tax advantages of home ownership. Currently, you can deduct the mortgage interest you pay each year on your home, helping to reduce you tax liability. For many of us this “mortgage interest deduction” opens up the opportunity to “Itemize” our deductions. Just renting, we would most likely to be stuck with the standard deduction. On the flip side, when you sell an investment you are likely to be hit with “Capital Gains”. This is the tax charged to you on the financial gain you received from the investment. This tax doesn’t apply the same way when you sell your primary residence. Under current IRS regulations, you are allowed to exclude up to $250,000 of the gain on the sale of your main home if you meet certain tests. You may be able to exclude up to $500,000 of the gain on the sale of your main home if you are married and file a joint return and meet the requirements. (Special rules apply for joint returns.) Please consult with your tax preparer or CPA to determine what IRS rules and regulations apply to your specific situation.
In conclusion, every investment has pros and cons, including real estate. If you are considering home ownership, I urge you take another look at real estate as an investment. Feel free to give me a call if you have questions along the way. MacIntyre & Cowen Real Estate Consultants would be happy to help you navigate through the process, call us today at 517.999.2675. www.pmachomes.com
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