Financial Benefits of Home Ownership – Great Article I had to share…

Great article I was very excited to share. Sometimes I see buyers pass an opportunity since the cost of owning is higher than renting. However, with the rental prices in the Silicon Valley going up – it may be time to consider a more secure future by buying your own home. The Caton Team is always here to answer your questions. 650-568-5522 or info@TheCatonTeam.com  – Enjoy this article.

 

Freshen Up On The 7 Financial Benefits of Home Ownership This Tax Season

The financial benefits of homeownership are evident year round, but particularly around tax time – they seem to jump off the page. Let’s examine how homeownership makes “cents” –  from the tax benefits, to good old fashioned financial stability.

1. Homeownership Builds Wealth Over Time

We were always taught growing up that owning a home is a financially savvy move. Our parents knew it, and their parents knew it. But this past decade of real estate turbulence has shaken everyone’s confidence in homeownership. That is why it’s so important that we discuss this again now that we’re in a ‘new market.’ Homeownership can be a very savvy financial move – but only if people buy homes they can actually afford. In 2014, this idea of sticking to a home you can afford to gradually build wealth is a “rule” that just happens to be new and old at the same time.

2. You Build Equity Every Month

Your equity in your home is the amount of money you can sell it for minus what you still owe on it. Every month you make a mortgage payment, and every month a portion of what you pay reduces the amount you owe.  That reduction of your mortgage every month increases your equity. That is especially true now with the elimination of risky mortgages like negative amortized and interest-only loans – thanks to the new “Qualified Mortgage” rules. The way mortgages work is that the principal portion of your payment increases slightly every month year after year. It’s lowest on your first payment and highest on your last payment. Thus, as the months and years go by, your equity grows!

3. You Reap Mortgage Tax Deduction Benefits

▪   Mortgage deduction: The tax code allows homeowners to deduct the mortgage interest from their tax obligations. For many people this is a huge deduction, since interest payments can be the largest component of your mortgage payment in the early years of owning a home.

▪   Some closing cost deductions: The first year you buy your home, you are able to claim the points (also called origination fees) on your loan, no matter whether they are paid by you or the seller. And because origination fees of 1 percent or more are common, the savings are considerable.

▪   Property tax is deductible: Real estate property taxes paid on your primary residence and a vacation home are fully deductible for income tax purposes.

4. Tax Deductions on Home Equity Lines

In addition to your mortgage interest, you can deduct the interest you pay on a home equity loan (or line of credit). This allows you to shift your credit card debts to your home equity loan, pay a lower interest rate than the horrendously exorbitant credit card interest rates, and get a deduction on the interest as well.

5. You Get a Capital Gains Exclusion

If you buy a home to live in as your primary residence for more than two years then you will qualify. When you sell, you can keep profits up to $250,000 if you are single, or $500,000 if you are married, and not owe any capital gains taxes. Now, it may sound ridiculous that your house could be worth more than when you purchased it after these past several years of falling house prices. However, if you purchased your home anytime prior to 2003, chances are it has appreciated in value and this tax benefit will come in very handy.

6. A Mortgage Is Like a Forced Savings Plan

Paying that mortgage every month and reducing the amount of your principal is like a forced savings plan. Each month you are building up more valuable equity in your home. In a sense, you are being forced to save—and that’s a good thing.

7. Long Term, Buying Is Cheaper than Renting

In the first few years, it may be cheaper to rent. But over time, as the interest portion of your mortgage payment decreases, the interest that you pay will eventually be lower than the rent you would have been paying. But more importantly, you are not throwing away all that money on rent. You gotta live someplace, so instead of paying off your landlord’s home or building, pay off your own!

As always, you must look very hard at your personal situation before making the big decision to buy. Stay tuned to Trulia Tips as we explore more on this topic.

ALL: What’s your favorite benefit of home ownership?

I read this article at: http://www.trulia.com/tips/2014/02/7-financial-benefits-of-home-ownership/?ecampaign=cnews&eurl=www.trulia.com%2Ftips%2F2014%2F02%2F7-financial-benefits-of-home-ownership%2F

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Thanks for reading – Sabrina

The Caton Team – Susan & Sabrina – A Family of Realtors

Sabrina BRE# 01413526 / Susan BRE #01238225 / Team BRE#70000218/ Office BRE# 0149900

Is Market Recovery Slowing Down? Great Article from SF Gate

Great article about our local Real Estate market – is recovery slowing down?  Or is supply holding back the reins?

Signs of possible slowdown in housing recovery


By: Kathleen Pender, San Francisco Chronicle & SF Gate

Bay Area home prices rose on a year-over-year basis last month, albeit at a slower pace than earlier in the year, while sales fell to their slowest pace for a December since 2007, DataQuick reported Wednesday.

It was another sign of a potential slowdown in the housing recovery.

On Tuesday, the Mortgage Bankers Association lowered its forecast for 2014 mortgage originations, citing higher interest rates and uncertainty over new mortgage rules that took effect this month.
DataQuick attributed the sales slowdown to a lack of supply, not a lack of demand.
“Demand has been impacted by a roughly one percentage point increase in rates since spring. But we think the bigger deal is the lack of inventory,” DataQuick spokesman Andrew LePage says.
In the Bay Area, 6,714 new and resale houses and condos were sold in the nine counties last month. That was up 0.8 percent from November but down 12.7 percent from December 2012.
Sales are typically higher in December than November, but the seasonal increase is normally much higher – around 8 percent.
The December sales figure was the lowest for a December since 2007, when 5,065 homes sold.
The median price paid for a Bay Area home last month was $548,500. That was down 0.3 percent from November, but 23.9 percent higher than the same time last year. From April through August last year, prices rose 30 percent or more on a year-over-year basis.
More sales in spring

LePage says there will be more homes on the market in spring and summer, when the market typically heats up. Rising home prices will leave fewer homes underwater, so more homeowners will sell because they could make enough to pay off their mortgage. Also, there has been “a little more construction,” LePage says.
“Waiting (to buy a home) will get you more choice, but all bets are off on prices,” he says.
If the current rate of appreciation holds, “the typical home would be selling for $50,000 to $60,000 more by spring.

Perhaps twice that at the upper end of the market,” DataQuick President John Walsh said in a news release.

Tight inventories are also hurting the mortgage industry.

In its forecast Tuesday, the Mortgage Bankers Association predicted that only $1.12 trillion in home loans will be originated this year, down 36 percent from $1.76 trillion in 2013. In October, it predicted that 2014 originations would drop by only 32 percent.

The forecast came out hours after mortgage heavyweights Wells Fargo and Chase announced big drops in fourth-quarter mortgage originations as part of their earnings reports.

The numbers “just kept getting worse through the end of 2013,” says Michael Fratantoni, the association’s chief economist.

The association predicts that home-purchase mortgages will rise just 3.8 percent to $677 billion this year. In October, it was expecting a 9 percent increase.

Refinance originations, it says, will hit only $440 billion, down 60 percent form last year. In October it expected a 57 percent drop.

Higher rates a drag

The main culprit is higher interest rates. Mortgage rates were around 3.5 percent at the beginning of last year but jumped by a full percentage point in May and June. They have been hovering around 4.5 percent since then.

The immediate effect was to slash refinance volume, but home-purchase originations also suffer from a low-rate “hangover,” Fratantoni says. The ultra-low rates that persisted before May “pulled forward some (purchases) that might not have occurred until six months or a year later. Now we are now we are seeing a bit of a payback in terms of lower activity.”

The association predicts that the average 30-year mortgage rate will be above 5 percent by the end of this year and above 5.5 percent at the end of next year.

It also predicts that fewer mortgages could be made this year as lenders narrow their product lineup to conform with the new mortgage rules designed to outlaw some of the abusive lending practices that led to the financial crisis.

The new rules give lenders some protection from borrower lawsuits if they make what is known as a qualified mortgage and the loan goes bad. A loan is not qualified if it has certain features, such as interest-only payments, or if the borrower’s total debt payments (including the mortgage and other debt) exceed 43 percent of gross income.
Over government limit

The new rules apply only to jumbo and other nonconforming mortgages, because all loans that could be bought or backed by Fannie Mae, Freddie Mac, the Federal Housing Administration and other government agencies are automatically deemed qualified.

Government loans account for the vast majority of the mortgages nationwide but a smaller percentage in the Bay Area, where many borrowers exceed the government limit, which tops out at $625,500 for Fannie, Freddie and FHA loans in high-cost areas.

In the Bay Area, 15.4 percent of home-purchase loans exceeded $625,500 in the fourth quarter, but this number ranged from less than 0.4 percent in Solano County to 32 percent in San Francisco, according to DataQuick.

Kathleen Pender is a San Francisco Chronicle columnist. Net Worth runs Tuesdays, Thursdays and Sundays. E-mail: kpender@sfchronicle.com Blog: http://blog.sfgate.com/pender Twitter: @kathpender

I read this article at: http://www.sfgate.com/business/networth/article/Signs-of-possible-slowdown-in-housing-recovery-5146631.php
Remember to follow our Blog at: https://therealestatebeat.wordpress.com/

Got Questions? – The Caton Team is here to help.

Email Sabrina & Susan at: Info@TheCatonTeam.com

Call us at: 650-568-5522 Office: 650-365-9200

Want Real Estate Info on the Go? Download our FREE Real Estate App: http://thecatonteam.com/mobileapp

Visit our Website at: http://thecatonteam.com/

Visit us on Facebook: http://www.facebook.com/pages/Sabrina-Susan-The-Caton-Team-Realtors/294970377834

Yelp us at: http://www.yelp.com/biz/the-caton-team-realtors-sabrina-caton-and-susan-caton-redwood-city

Or Yelp me: http://www.yelp.com/user_details_thanx?userid=gpbsls-_RLpPiE9bv3Zygw

Connect with us professionally at LinkedIn: http://www.linkedin.com/profile/view?id=6588013&trk=tab_pro

Please enjoy my personal journey through homeownership at:

http://ajourneythroughhomeownership.wordpress.com

Thanks for reading – Sabrina

The Caton Team – Susan & Sabrina – A Family of Realtors

Sabrina BRE# 01413526 / Susan BRE #01238225 / Team BRE#70000218/ 01499008