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Income Tax Savings
Because of income tax deductions, the government is basically subsidizing your purchase of a home. All
of the interest and property taxes you pay in a given year can be deducted from your gross income to reduce your taxable income. For example, assume your initial loan balance is $150,000 with an interest rate of eight percent. During
the first year you would pay $9969.27 in interest. If your first payment is January 1st, your taxable income would
be almost $10,000 less – due to the IRS interest rate deduction. Property taxes
are deductible, too. Whatever property taxes you pay in a given year may also be deducted from your gross income, lowering
your tax obligation
Freedom & Individualism
When you rent, you are normally limited on what you can do to improve your home. You have to get permission
to make certain types of improvements. Nor does it make sense to spend thousand of dollars painting, putting in carpet, tile
or window coverings when the main person who benefits is the landlord and not you. Since
your landlord wants to keep his expenses to a minimum, he or she will probably not be spending much to improve the place,
either. When you own a home, however, you can do pretty much whatever you want. You
get the benefits of any improvements you make, plus you get to live in an environment you have created, not some faceless
landlord.
Saving
Some
people are just lousy at saving money, and a house is an automatic savings account. You accumulate savings in two ways. Every
month, a portion of your payment goes toward the principal. Admittedly, in the early years of the mortgage, this is not much.
Over time, however, it accelerates. Second, your home appreciates. Average appreciation
on a home is approximately five percent, though it will vary from year to year, and in some years may even depreciate.. Over
time, history has shown that owning a home is one of the very best financial investments.
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