The Three Main Reasons People Buy Homes:

Investment Potential

The largest investment for most people is their home. In the long run, investments in homes far outpace inflation. Homeowners build equity and, in most states, can borrow against it.

Appreciation Potential - Real estate is considered a good long-term investment because it usually continues to appreciate. The effects of leverage can multiply this increase when borrowed funds are used to purchase the home.

Principal Accumulation - Mortgages are designed to pay the interest for the time that the money has been used, as well as to retire the principal debt over a period of time. This means part of the payment each month is for principal accumulation.

Benefits

A homeowner can exclude up to $500,000 of capital gain if married and filing jointly, or up to $250,000 if single or filing separately. The home must have been the taxpayer's principal residence for two of the past 5 years.

There is no longer an age requirement for taking the capital gains exclusion.

Beginning May 7, 1997, there is no requirement to purchase another home more expensive than the one sold. Homeowners are free to buy up or down with no tax consequences, assuming their gain is less than the allowable amounts.

Property taxes and qualified home interest are deductible on Schedule A.

Although this tax law appears very simple it could be more complicated than it first appears. You should seek advice from a financial and/or a legal advisor to determine how this law applies to you.

Tax Deductibility of Mortgage Interest - Qualified mortgage interest on the first mortgage and home equity loans are deductible on Schedule A as a personal deduction.

Tax Deductibility of Property Taxes - Property taxes on a first or second home are deductible on Schedule A as a personal deduction.

Capital Gains Exclusion - A homeowner can exclude up to $500,000 of capital gain if married and filing jointly, or up to $250,000 if single or filing separately for homes that have been the taxpayer's principal residence for the previous two years.

Capital Gain Treatment - Congress allows preferential tax treatment on gains from capital assets held for more than one year. This would be important for a homeowner who has gains in excess of the allowable exclusion.

Capital Gains - Can be prorated if ownership is less than 2 years under certain conditions (such as change of employment).

Quality of Life

You can enjoy it - Pride of ownership is a valid reason for wanting to own a home. You can decorate it to your own taste and enjoy all of the benefits while making a great investment.

When working with the Jim Mills Team, one of our objectives is to provide you with the information regarding issues that could affect the future equity of your investment such as Neighborhoods, Schools and many other issues that could impact the resell ability of your home.

While this will be your largest investment, we want to address the potential equity increase for the future. Though we cannot forecast investment, we can provide historical data to help you make informed decisions.