Why Buying a Home on Kauai is a Good Idea
When it comes to the decision of whether or not to buy a home on Kauai you will hear various opinions with most people agreeing it is preferable to buy a home and live in it rather than pay rent. This is primarily due to the investment opportunity provided by owning a home as well as the pride of home ownership on the Garden Island.
Even once you have made the decision to buy a home on Kauai you may have some reservations and wonder if it is the right choice. This is a normal occurrence as home buying is a big decision and should not be taken lightly. Here are some of the main reasons to buy a home on Kauai.
Pride of Home Ownership
One of the primary reasons that people purchase a home is the pride of ownership that comes with having your very own piece of paradise.
When you own your own home you can make all of your own decisions on how the home is decorated, where you would like to attach permanent fixtures, what color to paint the walls and myriad other decisions that are yours and yours alone to make once you own the home.
Stability and Security
When you own your own home, you and your family enjoy the stability and security provided by home ownership. There is no question about a landlord’s intentions including a landlord who might suddenly decide to sell the home or rent it to someone else.
Additionally there is no concern about an unruly landlord showing up at odd hours or making unreasonable demands. Home ownership provides a high level of security and stability for you and your family.
Appreciation – Home Buying as an Investment in Your Future
Buying a home is an investment in the future, your future! The work you put into your home goes to increase its value, which also may increase over time due to rising property values.
Over time real estate values have consistently appreciated so it is reasonable to think that home values will continue to go up in the future. In this respect owning a home also serves as a hedge against inflation.
Tax Deductions and Capital Gains Exclusions
Homeowners benefit from a variety of tax benefits, and tax rates are favorable for those who own homes. If the outstanding balance on your mortgage is less than the price of your home then all of your mortgage interest is fully tax deductible, and interest is a significant part of your home mortgage payment.
Also fully tax deductible is the real estate property tax that you pay for your first home as well as a vacation home. If you live in the home for at least two of the previous five years then you can exclude as much as $250,000 of profit from a home sale from capital gains taxes (or $500,000 for a married couple).
In addition, if you make more profit from your home sale than the exclusion amount then it is considered a capital asset. If you have owned the home for more than one year then your capital assets enjoy preferential tax treatment. IRS Publication 530 provides specific tax information for homeowners, and check with an accounting/tax expert.
Building Equity as You Pay Off Your Mortgage
Part of your monthly mortgage payment goes toward the principal balance of your home mortgage loan and thus reduces your obligation and increases your equity. Typically the way the amortization process works is that each month the amount of principal paid off by your payment increases slightly. As time goes by a larger portion of each monthly payment will go toward reducing the principal balance.
Home Equity Loans
If you have an outstanding credit card balance you may be paying interest of up to 22% on the debt. A typical home equity loan has a much lower interest rate with the added benefit that all interest paid is tax deductible.
While there are some restrictions on home equity loans, for many home owners it makes financial sense to borrow against their home when they need money for an important reason such as paying a child’s college tuition or completing a home improvement. The ability to secure a home equity loan if you really need it is yet another reason it is nice to own a home on Kauai.
Kauai Realty Services and Vacation Accommodations
If you are considering buying a home on Kauai you can see some of the island’s best real estate deals by browsing through the Coldwell Banker Bali Hai Realty Kauai Real Estate Galleries, or you can use the Map-Based Kauai Home Search.
For the finest quality Kauai vacation rentals including luxury estates, condos, cottages and beach villas, see our Kauai Vacation Rental Galleries or use our new Map-Based Vacation Rental Search feature.
Also please feel free to give us a call. The Bali Hai Realty staff will be happy to help you find the perfect Kauai vacation rental or assist you in the process of buying or selling a Kauai home.