Financial Benefits of Being a First-Time Homebuyer
Buying a home can be overwhelming and tiresome and it surely can get a long process. Being a homeowner means committing to years of mortgage and insurance as well as endless paper work, don’t forget taxes! In order to make sure that you’re saving money and understanding the tax benefits and advantages of being a first-time homebuyer here are some tips.
Advantages for being a first-time homebuyer
- Able to deduct interest on your mortgage
Home mortgage interest deduction is an amazing benefit for those that own homes. With this, you’ll be able to deduct all the interest you’ll pay on your home mortgage. But, of course there are some regulations in order to qualify. Your mortgage can’t be more than $1 million, mortgage must be secured by your home, and must be on a qualified home which can be your vacation, main, or secondary home.
Also, many people think that you have to be married or have to own your home together in order to claim interest. But, when it comes to deduction, the home can be owned by separately you or your spouse, or even together, it doesn’t matter!
- Trying to Deduct Points
If you don’t know what points are they’re prepaid interest that can be offered during the closing process when buying your home in order to improve the rate on your future mortgage. The more points you pay up front, the rate on your mortgage you get!
In order to deduct points you have to meet a certain requirement as well for example, points have to be paid on a secured loan by your main home (not secondary or vacation)!
- You might qualify to deduct PMI (Private Mortgage Insurance)
So some of you might ask, what is Private Mortgage Insurance or PMI? PMI is when you make a down payment of less than 20% on a home, then a lender will require PMI. This protects the bank or lender from losing money if you end up foreclosing. PMI can also be required if you decide to refinance with less than 20% of equity.
With that being said, if you make less than $109,000 a year within a household, you’d be able to claim a tax deduction on the cost of PMI.