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Taking Title
of Your New House
How you take title in your new home is key decision. Unfortunately,
in the euphoria of the moment, many new homeowners don't put
much thought into it.
Title
The first question is how much housing expenses you can afford. Housing expenses are the sum of mortgage principal, mortgage interest, property tax, homeowner's insurance and private mortgage insurance. Second, you should ask yourself how much overall mortgage payments you can afford.
When purchasing a new home, you become the title owner of
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Essentially, this means you are listed in public records
as the legal owner. This may sound like a simple concept,
but how you're classified as an owner can impact legal and
tax issues. Here are some issues to consider when taking title.
Single Owner
If you are purchasing the property on your own, there is
really only one title choice. Yep, you are going to be listed
as the sole owner, to wit, in your own name. If you are investing
in rental or commercial properties, you should speak with
a lawyer about purchasing the properties through a limited
liability company to limit potential liabilities.
Two or More Owners
If you're married, many states require you to take title
in a property as community property. In such states, you and
a spouse are automatically considered to be joint owners regardless
of any other factors. Community property title can have tremendous
but macabre tax benefits. If one spouse dies, the living spouse
gets a "step up" basis for tax consequence and huge
capital gains taxes. For instance, if you purchased a home
for $200,000 and it is worth $400,000 when a spouse dies,
the remaining spouse gets to figure any capital gains using
$400,000 as the cost of the house instead of $200,000.
Joint Tenancy
In some states, spouses are not required to take community
property title. Instead, they and any collection of two or
more owners may take title in joint tenancy. The advantages
of joint tenancy are twofold. First, you get the step up basis
mentioned above. Second, title in the property automatically
transfers to surviving owners upon the death of one owner.
This means you get to avoid probate, an expensive and lengthy
court process. Taking Title When buying a home, don't just
pick title willy- nilly. Take the time to explore the options
in your state and pick the best one for you.
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