Economic Recovery and Your Home

Current and new homeowners can benefit from the federal government’s economic initiatives and other perks of homeownership.

Homeownership is an investment in the quality of your life, and it has many benefits that aren’t quantifiable, such as the pride of ownership and a sense of belonging to a community. Still, you need to manage your real estate investment just as you would manage any other investment.

If you’re like many people, your home is probably one of your largest investments. And, up until recently, you’ve probably seen the value of your home rise at a steady, if not stellar, rate. As you wait out this current real estate slump, there are more immediate benefits that might be available as part of the federal government’s efforts to revitalize the economy overall, and the housing sector in particular. These initiatives not only offer significant aid to first-time buyers, but they can also help current property owners hedge some of their risks.

The American Recovery and Reinvestment Act of 2009, commonly referred to as the “federal stimulus bill,” contains several provisions directed at helping homeowners and potential homebuyers. Perhaps the most significant benefit for first-time homebuyers is a tax credit of up to $8,000 for purchases made between Jan. 1, 2009 and Dec. 1, 2009. When this initiative is coupled with other factors, such as more affordable home values and historically low interest rates, it provides enticing new opportunities for prospective homebuyers.

“For new homeowners in this environment, affordability has increased,” says Joseph Brusuelas, Director of Market Economics at Moody’s in West Chester, PA. There are also incentives for parents who want to help their children take advantage of current market conditions. Each parent is able to make a tax- exempt gift of $13,000 to a child in 2009 that can be used toward a down payment on a home.

Another government program, the Homeowner Affordability and Stability Plan, aims to help 7 million to 9 million homeowners by making it easier to refinance, modify home loans and keep the interest rates on their mortgages low.

If you’re a current homeowner and want to take advantage of today’s lower interest rates, but owe slightly more than your home is worth – up to 105% of your home’s value – you might be able to qualify for refinancing under the plan. To be eligible, Fannie Mae or Freddie Mac must own the loan; you must be current on your mortgage payments and be able to afford payments after refinancing.

If you’re not sure what organization owns your loan, ask your lender, visit Fannie and Freddie online or call: (800) 732-6643 (800) 373-3343.


Homeownership in the Current Economy

The recent government-sponsored incentives aren’t the only financial benefits of homeownership. “Real estate, as it pertains to homeownership, should be looked at long term,” says Michael Pallares, Vice President, Mortgage Division Manager at First Midwest Bank in Itasca, IL. “As a homeowner, you can deduct items such as real estate taxes and mortgage interest to reduce your annual income tax obligation.”

The capital gains exclusion also allows you to reap the benefits of your home’s appreciation without incurring tax consequences, Pallares says. And, when used wisely, tapping into a home’s equity can be a convenient, less expensive and tax-efficient source of financing for major expenses, he added.

This may be a time of uncertainty in the marketplace, but it’s also a time of potential opportunity. Whether you’re looking to refinance or help your children benefit from new homebuyer incentives, there are plenty of ways to minimize the risks and maximize the benefits of your property.

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