For many first-time homebuyers, the mortgage loan process is approached with a stressful mindset. Mortgages are a big commitment, and some people going through this process for the first time naturally worry about their financial security.
At Mortgage Ogden, we’re here to help. Did you realize that there are actually several major financial benefits to being a first-time homebuyer? Let’s take a look at these to make sure you’re taking advantage of them.
There are several potential tax deductions that might be possible for you with your first mortgage:
• Mortgage interest: At the end of the year, your mortgage lender will send you a 1098 form with information for your taxes. Using itemized deductions, you may be able to deduct some or all of the interest you paid on your mortgage from your taxes. Check with your tax expert about any caps or limits here.
• Real estate taxes: You pay property taxes on a yearly basis, whether personally or through an escrow account. You can again used itemized deductions here to remove taxes for these funds.
• Points deduction: If you use prepaid interest points on your loan to lower your payments, it’s often possible to deduct that full amount in the year of purchase. There may be exceptions here.
• PMI deduction: If you put under 20 percent down on your home and subsequently had to pay a monthly private mortgage insurance premium, you can often deduct these expenses on your 1098 form.
• Down Payment and IRA Dollars: First-time homebuyers might be able to use up to $10,000 of IRA money toward their down payment without any 10 percent tax penalty. If this Is a traditional IRA, you will still have to pay income tax when funds are withdrawn.
• Capital gains relief: Your home is considered an investment, meaning it should increase in value long-term. If you sell the home after living in it for at least two years of using it as your primary residence, it’s possible you can avoid capital gains tax on the first $250,000 in profits from the sale.
For more on how being a first-time homebuyer can benefit you financially, or to learn about any of our other mortgage services, speak to the pros at Mortgage Ogden today.