The first question you should answer is: what is your reason for buying a new home? Motivation is like a fingerprint: everyone’s is different – in some way, shape or form.
Are you tired of paying your landlord’s mortgage instead of your own?
Are you looking for an investment… not necessarily an investment property, but an investment? There are many reasons related to financial management / wealth-accrual for purchasing a home:
- Monthly mortgage payments build equity. Equity builds wealth and provides a potential financial resource down the road (ie, in terms of a home equity loan)
- Real estate has consistently appreciated in value. Yes, there have been periodic up-and-down cycles in real estate; but, in the long run, real estate has almost always increased in value.
- Home ownership provides a consistent and excellent tax shelter in the form of the mortgage interest deduction and property taxes. When you pay rent, you are almost always covering these expenses for the property owner – without experiencing the benefits of a tax deduction for yourself. (NOTE: if you are a first time home buyer in NH, you may also qualify for a mortgage credit program that will multiply the benefits of the interest deduction).
- Additionally, if the property has served as your primary residence for at least two of the previous five years, then you can benefit from the capital gains exclusion: that is, you can shelter up to $250,000 (for an individual) or $500,000 (married couples) of profit on the sale of the property from taxation. Further, if you are fortunate enough to make more profit than the allowable exclusion, then you will receive preferential tax treatment on that additional profit (NOTE: because you have owned the property for more than one year it is considered a capital asset, and capital assets are (currently, at least) taxed at a much lower rate than traditional “income”).
Have you experienced a change in your life circumstances that requires downsizing… or upsizing (marriage, new baby, empty nesters)?
Do you want more space (larger rooms, a new office, a larger yard) or additional features (a swimming pool, patio, hiking trails, waterfront)?
Are you relocating, looking to live in a different neighborhood, or moving to be closer to work?
Having a clear sense of your reasons for buying will help you choose the right property.