Mortgage Interest and property tax are tax-deductible.
If you owns your principal house along, you don't need to
pay taxes on up to $250,000 profit from the sale of the house.
If a couple sells jointly owned principal house, the no tax profit
increase from up to $250,000 to up to $500,000. However, this advantage is under the
requirements that the house must be your principal residence and you must have
lived in this house at least two years of the provious five years. If you
don't meet the requirement, you may still claim a partial
exemption for some circumstances.
When you need money for other large purchase like buying a car or
another house, you can get cash by applying a home equity loan which
using your house as security. In other words, you can get cash by increase total
amount of current house loan. The benefit of using home equity loan is interest is tax deductable.
For example, if the market value of your house is $100,000 and the you has $40,000 loan remaining. A home equity loan
you can get is $100,000 x 75% - $40,000 = $35,000 (75% is just an
example, different bank or lender has different rate).
What you need to consider are:
1.You have steady source of income to pay mortgage and other costs.
2. You have some
deposit to pay down payment (suggest 20% of house price). If you don't pay 20%, you can also buy a
house. But you may need to pay mortgage insurance every
month until reach 20% of the house price.
3.You will live in this area for 2 years or more.
If you situation are described above, you should seriously
consider buying a house.
Suppose you have $20,000 in cash and
plan to use this money to purchase an on-bus-line
condo in Chapel Hill to rent.
Sales Price of the condo: $85,000
Size : ~1000sqft. 2 bed rooms, 2 bath rooms with
kitchen, living room and dining area
Own
Rent
First payment
Down Payment
~ $17,000 (20%). <$17,000 (<20%) if you pay a mortgage insurance
N/A
Closing cost
Vary depending on your credit, credit
points you purchase and closing option (you can
chose "no closing cost" option. However, the
interest rate may higher than that with closing
cost)
You monthly payment
Mortgage Payment
~ $408/month (Include principal and interest. The
interest is based on 6.0% interest rate for 30 years
fixed rate. If you are sure you will move out years
late, you can use ARM loan to get lower
interest rate).
N/A
Property tax
~ $110/ month
N/A
Home Owner Associate (HOA) fee>
~ $120/month (usually include water)
N/A
Property insurance
~ $20/month
N/A
Regular maintenance
~ $10 - $80/month (varies based on condition)
N/A
Total payment
~ $668 - $738/month
~ $700/month + $700 deposit
You own
This condo
Nothing
Benefits
Mortgage interest and property tax are tax deductible.
Real property is one of the best investments.
You
are building equity. When you sell the house, you
may not only get all pay-out money back, but
also earn money!!!
Protect yourself from rent increases
Free of most of the maintenance and repairing responsibilities
Disadvantages
You need to take care condo maintenance and repairing.
Equal Housing Opportunity
