What are the Benefits of Becoming a Homeowner in Hunterdon or Somerset County?

What are the Benefits of Becoming a Homeowner in Hunterdon or Somerset County?

Presented as a public service by Joe Peters of Coldwell Banker

 

Every family has a list of important dates. We celebrate birthdays, anniversaries, pet adoptions…and the list goes on. For 64.4 percent of households in the United States, this list includes the day they became a homeowner for the first time!

Why is this date important? Homeownership is not just a roof over your head! It represents shelter, stability, wealth, and pride! For decades, homeownership has been an important part of the American Dream!

However, many question if the next generations see the same benefits of homeownership as their predecessors.

In case we have forgotten, some of those benefits are:

Non-Financial Benefits

1) Educational Achievement: Homeownership has a positive impact on academic achievement, including reading and math performance in children 3-12 years old.

2) Civic Participation:Owning a home means owning a part of the neighborhood.” Homeowners have a stronger connection to their neighborhood and are more committed to volunteer.

3) Health Benefits: Adjusting for a range of demographic, socioeconomic and housing-related characteristics, homeowners have a substantial health advantage over renters.

4) Public Assistance: The report shows 47% of homeowners use their home equity credit lines to help pay other debts, diminishing their need for public assistance.

5) Property Maintenance and Improvement: A well-maintained home not only generates benefits through consumption and safety, but a high-quality structure also raises mental health.

6) Pride of Ownership: This place is uniquely “yours.” You can customize it according to your likes and personality.

In addition to financial benefits, homeownership also brings significant social benefits. These not only pertain to the family, but extend to the communities, the state, and the country!

Financial Benefits

Buying a home is an investment in your future!

  1. Appreciation: On average, home prices are appreciating annually at a rate of 3.6%. This helps to create a safety net.
  2. Forced Savings: Your mortgage is like a forced savings plan! With each payment, you are reducing the principal of your loan.
  3. Home Equity: Homeownership builds equity every single month. You can later use that equity to start a business, send your children to college, etc.
  4. Net Worth: A homeowners’ net worth is 44x greater than renters! This gives you the financial freedom to invest.
  5. Stability: Rent prices increase 4% annually! A fixed mortgage payment allows you to save for future projects and guard against inflation.
  6. Tax Benefits: The government has created tax benefits to encourage customers to purchase. (Talk to your CPA to see which benefits apply to you).

Bottom Line

Homeownership is and will always be part of the American Dream! There are many financial and non-financial benefits to take advantage of when owning a home. If owning a home is part of your dream, contact a local real estate professional to help you with the process!

 


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There Are Tax Benefits With Home Ownership in Hunterdon and Somerset Counties

There Are Tax Benefits With Home Ownership in Hunterdon and Somerset Counties
Homeownership has always been the “great American dream”. And Congress — with one exception — did not take it away when it passed the tax reform bill last December.

To foster and encourage this dream, Congress has consistently enacted — or preserved — tax legislation which favors homeowners. Indeed, much has been written that our tax laws discriminate against renters, by giving unfair and unequal tax benefits to those who own homes.

Every four years, some candidate for high political office tries to focus our attention on equalizing the tax laws, and repealing the homeowner benefits, but these arguments have consistently fallen on deaf ears.

For those of us who own homes, here is a list of the itemized tax deductions available to the average homeowner. Every year, you are permitted to deduct the following expenses:

Taxes. Real property taxes, both state and local, can be deducted. The one exception referenced above: tax filers can deduct on Schedule A any combination of state and local property taxes and income or sales taxes but only up to a total of $10,000. Interestingly, married couples who file their own separate tax return can only deduct up to $5000.

However, it should be noted that real estate taxes are only deductible in the year they are actually paid to the government. Thus, if in year 2018, your lender held in escrow moneys for taxes due in 2019, you cannot take a deduction for these taxes when you file your 2018 tax return.

.Mortgage lenders are required to send an annual statement to borrowers by the end of January of each year, reflecting the amount of mortgage interest and real estate taxes the homeowner paid during the previous year.

Mortgage Interest. Interest on mortgage loans on a first or second home is fully deductible, subject to the following limitations: acquisition loans up to $1 million, and home equity loans up to $100,000. If you are married, but file separately, these limits are split in half. But note that for new loans taken out after December 14, 2017, the limit on deductible mortgage debt is reduced to $750,000. Loans in existence prior to that date are grandfathered.

You must understand the concept of an acquisition loan. To qualify for such a loan, you must buy, construct or substantially improve your home. If you refinance for more than the outstanding indebtedness, the excess amount does not qualify as an acquisition loan unless you use all of the excess to improve your home. However, any other excess may qualify as a home equity loan.

Let us look at this example: Several years ago, you purchased your house for $150,000 and obtained a mortgage in the amount of $100,000. Last year, your mortgage indebtedness had been reduced to $95,000, but your house was worth $300,000.

Because rates were low last year, you refinanced and were able to get a new mortgage of $175,000. Your acquisition indebtedness is $95,000. The additional $80,000 that you took out of your equity does not qualify as acquisition indebtedness, but since it is under $100,000, it qualifies as a home equity loan.

Several years ago, the Internal Revenue Service ruled that one does not have to take out a separate home equity loan to qualify for this aspect of the tax deduction. However, if you had borrowed $200,000, you would only be able to deduct interest on $195,000 of your loan — the $95,000 acquisition indebtedness, plus the $100,000 home equity.

One more caveat: the proceeds of a second mortgage — or a home equity loan — are still deductible but only if the money is used to substantially improve the property.

The remaining interest is treated as personal interest, and is not deductible.

Points. Because mortgage rates are still considerably low, not too many borrowers are paying points. When you obtain a mortgage loan, in order to get a lower rate mortgage, you would pay one or more points. Whether referred to as “loan origination fees,” “premium charges,” or “discounts,” these are still points. Each point is one percent of the amount borrowed; if you obtain a loan of $170,000, each point will cost you $1,700. And the interest rate on your loan will be lowered.

The IRS has also ruled that even if points are paid by sellers, they are still deductible by the homebuyer. Points paid to a lender when you refinance your current mortgage are not fully deductible in the year they are paid; you have to allocate the amount over the life of the loan. For example, you paid $1700 in points for a 30 year loan. Each year you are permitted to deduct only $56.66 ($1700 divided by 30); however, when you pay off this new loan, any remaining portion of the points you have not deducted are then deductible in full.

Needless to say, if you have any questions about these tax benefits, discuss them with your financial and legal advisors.

 

 


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