Investment of Home Essay

1707 Words Feb 19th, 2014 7 Pages
The Investment Value of Home Ownership by Clarence C. Rose, PhD

Abstract: Under tbe currentfitiance and economic environment, even with fears of a potential real estate bubble, home ownership may be one of the best long-term investment opportunities available today. For most Americans, their homes are their greatest source of net worth and a substantial source of tax savings. This article presents an overview of the tax savings opportunities available to homeowners and analyzes the investment value of home ownership in the current real estate environment using different levels of mortgage financing and costs of renting compared to owning a home over different time horizons.

Introduction or many Americans, the purchase of a home is
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This Issue of the Journal went lo press in December 2005. Copyright © 2006. Society of Financiai Service Professionals.

Journal of Financial Service Professionals JANUARY 2006

The Investment Value of Home Ownership

Tax Deductions Available in the Year of Purchase
The numerous tax benefits available to homeowners can save individuals thousands of dollars In reduced federal and state income taxes over the period of home ownership. When buying a home, most indi-^ viduals will finance a significant portion of the home's purchase price. In today's real estate mortgage environment, some financial institutions are offering interest-only mortgage loans and even no-down-payment mortgage loans to qualified buyers in order to make home buying more affordable in a rising real estate market. The settlement closing expenses incurred by the homebuyer at the time of purchase will generally range between 3-5% of the amount being financed to purchase a home. The points and loan origination fees paid by the homeowner to the lending institution tor obtaining the home mortgage may be deductible by the homebuyer in the tax year of the purchase as an itemized deduction, if the following Internal Revenue Code (IRC) conditions are met:• The cost incurred by the homeowner tor points and loan

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