Four Tax Advantages of Owning a Home

Four Tax Advantages of Owning a Home

There are many advantages to owning your own home. But did you know you owning your own home also provides you with several tax benefits as well?

With tax season fast approaching, people are looking for ways to save on their taxes and put more money back in their pockets. Owning your own home offers several tax advantages and benefits and with today’s low mortgage rates, you can put even more money back in your pocket by purchasing a home this year. Here are for tax advantages of owning a home so you can remember them when you are filling out your tax forms for this year.

Mortgage Interest
Did you know you can deduct the interest on your mortgage from your taxes? It’s true! This is one of the biggest tax advantages of owning your own home. The rule states that up to a million dollars of mortgage interest is tax deductible as long as you spend some time in that home. So that means you can even deduct the mortgage interest from your vacation home as long as you spend a couple weeks there each year.

Most homeowners already know about that tax advantage to owning a home. But you might not have known this next one: The IRS allows you to deduct the interest of any debt that uses your house to secure the loan. The debt can be no more than $100,000 however. This applies mainly to home equity loans.

Selling Your Home
When you own your own home and you decide to sell it, you probably do not have to pay taxes on the profits you make from the sale of your home unless you make at least a $250,000 profit for individuals or $500,000 for couples who file jointly. This guideline also covers any land that is adjacent to your home unless you are using it for business.

This guideline also applies only to your main residence. You have to live at the home for two out of the previous five years in order to qualify for this tax advantage. Also, you can only claim this exemption once for every two tax years.

Moving Expenses
When you buy a new home that is 50 miles or more closer to your new job, you can deduct those moving expenses from your taxes for that year. However, in order to qualify for this tax advantage, you must work in the area of your new job for at least 39 weeks during the next year and you must also be employed there full time. If you are self-employed, however, you can deduct your moving expenses when you move to a new home.

Property Taxes
Did you know your property taxes are an income tax deduction? You can write off the property taxes for all the homes you own regardless if you live in them or not.

Tax deductions depend on a number of factors. It is always best to seek the guidance and expertise of a qualified accountant or tax professional when claiming a bunch of tax deductions. Look for one in your local area. The frustration they save you is definitely worth the money!

Benefits of Paying Off Your Mortgage Early

Benefits of Paying Off Your Mortgage Early

Everybody would like to pay off their mortgage earlier than expected, but do you know what benefits there are to doing so?

Paying off your mortgage has several advantages. Unfortunately, many home owners do not want to pay off their mortgages early because they have to pay more each month to make that happen and that gives them less spending money. To be fair, however, some home owners simply cannot put more money towards their mortgage than they already do. However, if you have the opportunity to pay off your mortgage a few years early, here are some benefits that you can reap.

Financial Freedom
How often do you want to buy something during the month but you can’t because you have to make sure you have enough to pay your mortgage payment? When you don’t have a mortgage payment, you can free up a lot of your money. Your mortgage payments are probably the largest bill you have each month. Just imagine how much more financial freedom you would have if you could have that much more money all the time! You could finally pay off some other debts, open that business that you have always wanted to open or buy that motorcycle that you’ve had your eye on for years.

More Money
The longer you pay on your mortgage, the more interest you are paying. Over a 30-year mortgage, you are paying thousands and thousands of dollars just in interest. However, when you pay your mortgage off early, you will pay less in interest. For instance, if you pay off your mortgage in 20 years instead of 30, that’s 10 years of interest that does not accumulate and get added to the overall cost of the home.

Save for Retirement
Mortgage payments often hinder homeowners from contributing as much to their retirement fund as they should. As a result, many homeowners retire but still need to find a job in order to live. When you pay off your mortgage ten years early, you can start putting that money into your retirement account. Just pretend like you are still making your mortgage payments, but send them to your money market or IRA instead.

Sense of Security
Imagine how good it would feel to own your home free and clear. You would never have to worry about getting it taken away if you lose your job or if financial times get tough. Your home belongs to you and you can do whatever you want to with it. If you want to pass it down to your kids after your death or anything like that, it is your decision since you own it.

Owning your own home is part of the American dream. Everybody wants to pay off their mortgage early so they have more liquidity with their money. You may even be able to refinance at today’s mortgage rates and make it happen that way. With some hard work and dedication, you can pay off your mortgage early and enjoy the benefits therein.

What You Need to Get a House Loan from a Bank

What You Need to Get a House Loan from a Bank

When getting a mortgage loan from a bank, you need to to prove several things to show that you are credit worthy. But what sort of documentation do you need?

Getting a house loan from a bank is one of the most common ways to finance the purchase of a new home. To get a house loan, however, banks require that you meet certain requirements, such as a down payment, proof of income and a decent credit score to evaluate you as a borrower. As long as you have the proper qualifications and you are a good financial risk, you are likely to get approved for a house loan even with today's low mortgage rates.

Proof of Income
Before being approved for a house loan, a lender is going to want to know that you have some form of income so you can make the mortgage payments. Whether you have a job or if you are self-employed, you will need verification. If you have a traditional job, your employer simply fills out a form provided by the bank or lender which includes information regarding the buyer's length of employment, their salary, any scheduled raises and other questions that can tell the lender if the buyer is a good credit risk. Self-employed buyers generally need to provide their tax returns for the previous two years and any current tax statements.

Bank Statements
If you have a checking and savings account, the bank or lender will generally want a copy of your statements for the last two months. This shows the lender that you pay your bills with your checking account rather than cash, which can be a red flag with many banks.

Tax Returns
Lenders will want to see your tax returns for previous years. The number of years you will need depends on the mortgage company. Some require three or more years of previous tax returns while others may only require the returns from the previous year. Ask your lender to find out how many years they require.

Credit Score
As of January 20, 2010, the U.S. Department of Housing and Urban Development announced that new borrowers need a credit score of at least 580 in order to qualify for the Federal Housing Association's 3.5 percent down payment program. If a new borrower has a FICO score below 580, they will have to put at least a 10 percent down payment on a home before they will be considered for a home mortgage. The new regulations are expected to go into effect in the early summer of 2010. Banks, on the other hand, may require a higher credit score if your mortgage is not backed by the federal government. Acceptable credit scores can vary between banks so shop around to find one willing to approve you for a mortgage based on your credit score.