Financing Your Home

One of the few tax breaks still available to the ordinary US citizen is the full deductibility of the interest related to a home mortage loan. And that applies both to one’s primary residence and to a second home used as a vacation getaway.

A home purchase also provides a unique opportunity to put the principle of financial leverage to work. While the home purchase generally involves only a relatively small downpayment (generally between 5 percent and 20 percent), the full value of the home is subject to appreciation over the course of homeownership. This means that with an average annual appreciation of just 4 percent over the course of a five-year period, the value of a $150,000 home will grow roughly $32,000 over the course of a five-year period. With an initial investment of only $15,000 (a 10 percent down payment), that represents a return of more than 200 percent on the initial investment of just $15,000 (the 10 percent downpayment.) With a 20 percent downpayment, the return would be a little over 100 percent during the same period of time.

Re-Financing:

When you purchase your home, your Residential Finance Specialist will assist you in selecting the best possible mortgage product to suit your specific requirements. Over time, however, your needs may change and new mortgage products better suited to those needs may become available. Or interest rates may drop considerably. In such cases re-financing your home may provide an opportunity to achieve an even better return on your home investment.

As the equity grows in your home (a result of both appreciation and the reduction in the loan amount through your regular payments), it can provide an opportunity to draw some cash value out of your home investment. You may be thinking of buying a vacation home, or some investment property. Or perhaps you just want to undertake a major remodeling project—a new kitchen or bath; a pool or patio; a room addition. You may have sufficient equity in your home to allow refinancing to make that possible.

As with the initial purchase and financing decisions, you can rely on a Residential Finance Specialist to provide helpful advice and to guide you through the entire process.