RE/MAX Bulkley Valley
3568 Highway 16 - P.O. Box 3340
Smithers, BC V0J 2N0
Phone: (250)847-5999
Fax: (250)847-9039
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Buying Your Home - Tax Considerations
When is the best time to buy?
Here are some frequently
cited reasons for buying a house:
* You need a tax break. The mortgage
interest deduction can make home ownership very appealing.
* You are not
counting on price appreciation in the short term.
* You can afford the
monthly payments.
* You plan to stay in the house long enough for the
appreciation to cover your transaction costs. The costs of buying and selling a
home include real estate commissions, lender fees and closing costs that can
amount to more than 10 percent of the sales price.
* You prefer to be an
owner rather than a renter.
* You can handle the maintenance expenses and
headaches.
* You are not greatly concerned by dips in home
values.
How do you
choose between buying and renting?
Home ownership offers tax benefits as
well as the freedom to make decisions about your home. An advantage of renting
is not worrying about maintenance and other financial obligations associated
with owning property. There also are a number of economic considerations. Unlike
renters, home owners who secure a fixed-rate loan can lock in their monthly
housing costs and make prudent investment plans knowing these expenses will not
increase substantially. Home ownership is a highly leveraged investment that can
yield substantial profit on a nominal front-end investment. However, such
returns depend on home-price appreciation.
"For some people, owning a home is a great feeling," writes Mitchell A. Levy in his book, "Home Ownership: The American Myth," Myth Breakers Press, Cupertino, Calif.; 1993. "It does, however, have a price. Besides the maintenance headache, the amount of after-tax money paid to the lender is usually greater than the amount of money otherwise paid in rent," Levy concludes. As for evaluating the risk associated with home ownership, David T. Schumacher and Erik Page Bucy write in their book "The Buy & Hold Real Estate Strategy," John Wiley & Sons, New York; 1992, that "good property located in growth areas should be regarded as an investment as opposed to a speculation or gamble." The authors recommend that prospective buyers spend a few months investigating a community. Many people make the mistake of buying in the wrong area. "Just because certain properties are high-priced doesn't necessarily mean they have some inherent advantage," the authors write. "One property may cost more than another today, but will it still be worth more down the line?"
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