The American DreamSubmitted by AssetGrade, LLC. on June 27th, 2018
Submitted by Kate Hennessy on June 27, 2018
When I look around our neighborhood, I see numerous homes for sale. No better time to think about your financial future than the day you close on your new home. It’s the single biggest investment in your life - do you know how to protect it and what it means for the rest of your financial goals? Sit down with a financial advisor to review this major investment and how it fits in with your financial plan.
Purchasing a new home brings up various financial considerations and opportunities.
Here are a few tips to consider when buying and/or selling a home:
1.) Taxes – when selling your primary residence, make sure to get the big capital gains exemption on the sale ($250K for single people, $500K for married couples), particularly if you make a good profit compared to your cost basis. This exemption is applicable to those of us who have lived in their home for at least 2 of the prior 5 years. Also, don’t forget to track the major costs you have incurred to improve your home, as they increase your cost basis and decrease your gains from a tax perspective.
2.) Emergency Fund – costs of owning a home are a key consideration. Generally speaking, three to six months of savings is adequate for an emergency fund, however in reality it’s not a bad idea to aim higher especially as you make this big investment.
3.) Insurance – the purchase of a new home will change the dynamics of your finances, which leads to a review of your insurance to make sure it is up to date with your needs.
There are many more factors to consider when buying and/or selling a home. This major life transition can be a stressful one, so it is a great opportunity to sit down with a financial advisor to see how this major investment impacts your financial picture.