Being a homeowner is Part of the American Dream!
Making mortgage payments is like having a savings account that accumulates savings (equity) for the homeowner, not the landlord. Mortgage interest and property taxes are tax deductible, rent is not.
Home values appreciate each year making home ownership a wise financial decision putting value into your investment portfolio.
- As an example, let's look at the purchase of a $200,000 house putting 20% down ($40,000).
- At an appreciation rate of 5% annually, a $200,000 home would increase in value $10,000 the first year.
- That means the homeowner earned $10,000 in one year with just a $40,000 investment.
In fancier investment terms, that makes the ROI (Return on Investment) 25% the first year!
What stock or money fund has produced that kind of ROI in the last few years? Added to the appreciation value are the tax deductions allowed.
Let's assume the mortgage interest and property taxes on the $200,000 home are $15,000 in one year. That means the homeowner's taxable income is reduced by $15,000.
That's something significant to make any tax payer smile!
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