Coldwell Banker Sea Coast Advantage Blog

Buying a New Home: The Best Investment


Posted: January 17, 2011 by Coldwell Banker Sea Coast Advantage

When is the right time to purchase a new home? While having your finances in order is a major factor, it can still be challenging to know when it is the right time to make such a large purchase.  Understanding the financial benefits of purchasing a new home may help you realize, the right time is right now!

Return on Investment

As a general rule, homes tend to appreciate at about five percent each year. Some years this figure will increase, some years it will decrease. The figure can also vary depending on the neighborhood and region you choose to reside in.

While five percent probably doesn’t have you jumping out of your chair, it may be beneficial for you to take a second look…

Imagine if you bought a $200,000 home, odds are you didn’t pay cash. Instead, you got a mortgage. Supposing you put as much as twenty percent down - that would be an investment of around $40,000.

At an appreciation rate of 5% annually, a $200,000 home would increase in value $10,000 during the first year. That means you would have earned $10,000 on an investment of about $40,000. Your annual "return on investment" would be a whopping twenty-five percent!

Of course, with a new home you are making mortgage payments, paying property taxes and paying for a variety of other miscellaneous costs. However, since the interest on your mortgage and your property taxes are both tax deductible, the government is essentially subsidizing your home purchase.

The rate of return on your Jacksonville NC new home or Wilmington NC real estate would be higher than almost any other investment you could make.

Income Tax Savings

Understanding your income tax savings can help you better comprehend how investing in a new home is practical. Because of income tax deductions, the government is basically subsidizing your purchase of a home. All of the interest and property taxes you pay in a given year can be deducted from your gross income to reduce your taxable income.

For example, assume your initial loan balance is $150,000 with an interest rate of eight percent. During the first year you would pay $9969.27 in interest. If your first payment is January 1st, your taxable income would be almost $10,000 less - due to the IRS interest rate deduction.

Not to mention, property taxes are deductible, too. Whatever property taxes you pay in a given year may also be deducted from your gross income, lowering your overall tax obligation.

Forced Savings

If you are thinking, but I’m lousy at saving money, you aren’t alone. Many people struggle with saving money, but by investing your money wisely in a new home, it can be like creating an automatic savings account. Your savings will accumulate in two major ways. Every month, a portion of your house payment goes toward the principal. Admittedly, in the early years of the mortgage, this is not very much. However, over time it begins to accelerate.

Secondly, your home appreciates. While the rate from year to year will vary slightly, your home will appreciate approximately five percent per year. History has shown that over time, owning a home can be one of the best financial investments an individual can make.

How do you begin searching for your dream home? Contact Coldwell Banker Sea Coast Realty to learn about Topsail Island realty, Wrightsville Beach homes and real estate in the North Carolina counties of New Hanover, Brunswick, Pender and Onslow.

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