Real Estate
July 25, 2017
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When is the right time to buy a home?

By: Scott Sheldon
July 14, 2017

The right time to purchase a home is different for every consumer. Following are some reason why you may want to pull the trigger sooner rather than later.

In most areas throughout the country over the last 30 years anyone who has bought a home and held it for a 10-year cycle has done financially well.  When you buy a home you earn the ability to write off all of your mortgage interest and all of your property taxes annually for as long as you own the home.

This is significant because you do not receive this benefit renting. If you’re renting you are effectively agreeing to be taxed on 100 percent of your money. Don’t like how much you pay in taxes? Buying a home can be a smart offset. Here’s why; as a homeowner all of your interest deduction and all your property taxes paid come off the top of your adjusted gross income.

Some may argue that they don’t want a mortgage payment that’s going to be higher than their rent payment however in the broader scheme of things that type of thinking is somewhat inaccurate. Here’s why; if you’re paying $2,400 per month in rent that is effectively equivalent to having a $3,600 per month mortgage payment. Sounds crazy right? Well here is an example. Let’s say you are in a 33 percent tax bracket. You would receive an approximate $1,200 homeownership benefit each month deducted from your mortgage payment.

When you purchase a home you are also on a forced savings plan as part of your payment is going tot he principal subsequently building home equity in the process. For example, on a 30-year fixed-rate loan, part of your payment will go to interest and part of your payment will go to the principal. Granted in first 10 years of the 30-year term most of your payment goes to interest, still a tiny portion of your payment goes to principal each month so at the end of 30 years your loan is paid off in full. This equity accumulation gradually grows monthly creating wealth for you in the process- akin to saving money in the bank.

Buying a home is a really large financial transaction likely the largest most will make in their lifetime. As such working with experienced professionals is highly advised.

Mortgage tip: During the time you are beginning to prepare to make the big ticket purchase be aware of where you seek advice. The reality of it is that other people will always have their opinion about who you should work with, how you should do it, when you should do it and how much down to use. Take this information with a grain of salt. Only you can decide what’s in your best interests.

Buying a home generally makes sense for the above mentioned reasons so long as you are comfortable with your long term projected income, debt picture, cash outlay, savings plan and overall financial stability.

 

Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com.