Tap Into Your Home’s Hidden Value

Home ownership has long been the quintessential American Dream. Buy your own home and you can fix it up any way you want to, raise your family and eventually sell it for more than you paid, add to your nest egg and help fund your retirement, right?

In today’s America, some folks, even some experts – are moving away from home ownership as a benchmark for the traditional American Dream. Admittedly, owning your own home is not the right choice for everyone. But if you’re a homeowner, sometimes you can benefit – saving money or even increasing the value of your home – in ways that aren’t available if you don’t own the house you live in.

For example, if you’re thinking about your taxes (and who isn’t, this time of year?), consider investing in a renewable energy system. These systems, such as solar hot water heaters, geothermal heat pumps, and wind energy systems no longer include a tax credit dollar limit.

The tax credit, which is available through 2016, is up to 30% of the cost, including both labor and materials. Your primary residence, second home, and any rental properties you own are all eligible for this credit.

If you’ve been thinking of upgrading the energy efficiency of your home, this may be the time to do it while saving on your taxes. Be sure to check with your accountant or tax advisor for details about how the program could apply in your situation.

Speaking of tax benefits, don’t forget that the interest you pay on your mortgage loan (and even on a home equity loan) is usually tax deductible, too.

Another often overlooked expense that can eventually be adjusted is the monthly cost of your primary mortgage insurance, or PMI. If you didn’t make a down payment of at least 20% when you bought your home, you were required to purchase Primary Mortgage Insurance. Once you have at least 20% equity in your home (meaning there’s a mortgage on less than 80% of your home’s current value) you are no longer required to pay PMI.

Although current housing values are not yet back to their pre-recession highs, if you’ve been in your home for a while, you may have already reached this point.

This website from the Federal Reserve Bank of San Francisco offers a helpful calculator to determine when you’ll no longer need to pay the premium on your PMI, as well as an easy to understand explanation of federal PMI requirements.

http://www.frbsf.org/publications/consumer/pmi.html#what

Be sure and come back to our blog next time and find out more about Home Equity: A Wise Way to Finance?

This article was posted in News.

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