Simmons Homes

Buying a home has tax advantages that simply renting a home does not. You may have heard people say that when you rent, you’re just paying someone else’s mortgage and helping them earn equity.

With tax season right around the corner the following are 6 itemized deductions that, as a homeowner, you can take on your taxes. This is what you’re missing out on by not having your own mortgage.

Home mortgage interest: When you first buy a home, the majority of your monthly payment is made up of interest. As you continue to pay your mortgage each year, slowly the balance shifts from interest, to principal payments.

The interest you pay on your mortgage up to $1 million per year is deductable. And if you own a primary and a secondary home, as long as they add up to $1 million or less, you receive deductions for both.

Property tax: Did you know your property taxes can be deducted from your federal income taxes? Both state and local taxes are counted in this equation.

Home buying expenses: Certain fees and closing costs associated with a new home purchase can be deductible. Some examples are prorated interest on a new loan, prorated property taxes, and loan origination fees.

Home equity loan: If you need money, for example, to pay off high-interest credit cards, start up a business, or any other number of reasons you can think of, you can borrow up to $100,000 against the equity in your home and deduct the interest.
Credit card interest, on the other hand, is not deductable.

Home-sale exclusion: When selling a home for profit, as long as you live in your home for two of the previous five years before selling, you only pay taxes on profits over $250,000 if you are single. You only pay taxes on profits over $500,000 if you are a married couple filing jointly. This exclusion can be taken once every two years.

Free Rental Income: Another unusual benefit of owning a home is that you can rent your home for up to 14 days during the year and pay no tax on the rental income. If you are a renter subletting your home you have to pay taxes on the income you earn.

If your lease is coming up for renewal and you are still trying to decide if it’s better to own verses rent in this economy here are 6 compelling reasons why you benefit as a home owner when it comes to tax time.

If you’ve been searching for a new home you’ve probably heard someone say, “There’s never been a better time to buy a new home, interest rates are at an all time low.” But what does that really mean to you?

Here’s a little history on interest rates. Do you know what a high mortgage rate would look like? December of 1980 the 30-year fixed mortgage rate was 14.79%. By January of 1990 it dropped to 9.67%. Over a 10-year period, rates inched down by about 5%. But by May 2000 the rates were only down to 8.52%, barely a 1% change in 10 years. So, when you hear reports that mortgage rates are at an historic low, this gives you more context.

Several years ago people were happy to purchase at a 6.5% interest rate, but now, with mortgages available from the high 4% to low 5% range there truly has never been a better time to purchase a home. Especially as rates slowly creep up again.

So what can you get for your money with lower interest rates?

Low rates mean lower payments: If you can afford a mortgage of $150,000 at a rate of 4.9% your monthly payments will be around $796 per month (not including taxes and insurance). A rate of 6.5% would cost about $948 per month. By purchasing a home while the rates are low, you free up over $150 per month.

Low interest rates mean you can get more house for your money: If you can afford a payment of about $790 per month (not including taxes and insurance) that means at a rate of 6.5% your mortgage would be approximately $125,000. Yet at a rate of 4.9% you can afford a home loan of almost $150,000 this gives you nearly $25,000 more house for the same payment of approximately $790 per month.

This difference in price could be the space you need and the options you want. Rolling $25,000 more into a mortgage could get you a lot more house for your money in a new home.

It’s important to understand rates so that you can make an informed decision about purchasing your new home. Many people keep waiting for the lowest rates. But how will you know when the rates hit bottom? Usually when standing at a higher point looking down.

By assessing your situation and looking for the right loan to fit your current lifestyle, you can look at the historic rates and see how much more home you will get for your money now verses just a few years ago.

Written By Kevin Swift:
Kevin Swift and Swift Home Loans is one of the top home loan originators in Oklahoma and the preferred lender for Simmons Homes. Learn more at www.swifthomeloans.net or fill out their online application here.  You can also call 918-528-6404 for your personal consultation.

*Rates and payments are approximate for the purposes of this article and do not include taxes and insurance.