principal. Every dollar put toward your loan’s principal represents a dollar of equity — actual ownership of the property. You may have to call to ensure they are applying it and not just letting it sit in the escrow account. Further, the property should appreciate in value each year, adding to the current equity (what the house could be sold for versus what is owed on it). Discounting certain blip periods, such as the 2008 housing bubble burst, home prices in the U.S. appreciate nationally at an average annual rate between 3% and 5%. Remember, though, home value appreciation in different metro areas can appreciate at markedly different rates than the national average. Improvements increase your home’s value. A homeowner can also increase a home’s value through home improvements, thus both making your home more comfortable and enjoyable while growing its loan-to-value (LTV) ratio. For instance, adding a bathroom or finishing a basement substantially increases the property’s functionality and appeal, while potentially boosting its value. Tax advantages of home ownership. There are significant tax benefits associated with buying a house, both at the time of purchase and for the duration of time you own the home: • Homestead exemption. Many states exempt owner- occupied homes (homesteads) from a portion of the property tax amount that would normally accrue. For example, in Texas your home is appraised at $100,000, and you qualify for a $25,000 exemption (this is the amount mandated for school districts), you will pay school taxes on the home as if it was worth only $75,000. Taxing units have the option to offer a separate exemption of up to 20 percent of the total value. Check out the FAQs at https://comptroller.texas.gov/taxes/
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