Make your home work for you

So, you’re thinking about buying a home. You’ve crunched the numbers, figured out how much you can spend and settled on a price range for your search. Your conclusion? It’s going to be a challenge. That shouldn’t come as a surprise of course, but what may shock you is just how much you can save on your purchase and just how quickly your home can start paying you back.

You won’t need to wait until years from now when you sell your home to see a return on your investment. There are several ways your house can start working for you almost immediately and, in this economy, you’ll likely want to take advantage of them.

Federal first-time homebuyer tax credit

First-time homebuyers, or those who haven’t owned a home in at least three years, who purchase this year are eligible to receive up to an $8,000 tax credit. This is like the government’s big “thank you” for buying. There are a couple of catches, including the requirement that you live in the home for at least three years, but the payoff may be well worth it. Already bought a home? Those who bought between April 9, 2008 and Jan. 1, 2009 may qualify for a $7,500 no-interest credit to be repaid over 15 years or when the home is sold. For more information, visit www.federalhousingtaxcredit.com.

California’s $10,000 new home tax credit

Whether or not you have owned a home before, you may be eligible for up to a $10,000 tax credit if you purchase a home between March of this year and March 1, 2010 that is newly constructed and has never been occupied. The home must serve as your primary residence for at least two years and, because there is a limited pool of funds, the credit is limited to the first 10,000 new homes purchased in the state. For more information, visit the State of California Franchise Tax Board at www.ftb.ca.gov/individuals/New_Home_Credit.shtml.

Tax deductions

Boy, will you hit the jackpot come April 15! Doing your taxes usually isn’t fun, but as a homeowner you may enjoy seeing how much you can write off. Of course, these matters tend to be very complex and detailed, but it basically comes down to this: owning a home can provide some of the best tax write-offs available to the average person. Your biggest tax breaks will be your mortgage interest and property taxes.

On a new home purchase, nearly all of the payment at first goes to interest, so most of your mortgage will be deductible.

On a $2,100 monthly interest payment, for example, someone in the 33 percent tax bracket could see a real dollar savings of $700 a month or more than $8,000 a year.

It’s really worth a call to your accountant to see just how much you’ll be able to write off come tax time.

Reverse Mortgages

This could be a bit down the line for you depending on your age, but it’s never too early to learn about your options. A reverse mortgage enables homeowners who are 62 and older to convert part of their home equity into tax-free income. In general, the older you are, the more valuable your home and the less you owe on it, the more money you can get. The proceeds can be used for anything from repairs to daily expenses, health care or even vacations. The loan is repaid either when you die, sell the home or permanently move out. Though some private companies offer reverse mortgages, the most popular is the U.S. Department of Housing and Urban Development’s Home Equity Conversion Mortgage (HECM), which is insured by the federal government through the Federal Housing Administration. For more information, visit their Web site at www.hud.gov.

There are so many benefits to buying a home and the expense shouldn’t be a burden on you and your family. It may take some time, but do your research and take advantage of as many opportunities available to you as possible. Purchasing a home is one of the best investments you can make and when pay day comes, you’ll be thankful you did.

(Todd Mendoza is the manager of Coldwell Banker of Petaluma. He can be reached at 769-4303.)