Many people dream of becoming the owner of a house in the USA, but they think that this is impossible due to their financial situation. A mortgage allows you to buy real estate at a relatively low interest rate with the possibility of payment over a long period of time. With such a financing tool, real estate in the USA becomes much easier to acquire.
In Europe, mortgage loans are available at 1-5% per annum, in the USA – 3-4%. The western market is stable. Accordingly, central banks in Europe and the United States set key rates lower, and banks, in turn, offer cheaper mortgage loans.
In addition, inflation is lower in the United States. For example, annual price increases over the past 8 years have been close to the 2% rate. The highest rate was achieved in 2011 – 2.96%. At the end of 2017, it amounted to 2.11%.
What determines the rate?
First of all, inflation determines the rate. No bank will operate at a loss, so rates will always be higher than the price increase. Another important factor is the key rate of the Central Bank. Payments and fines are calculated from this indicator; in addition, the Central Bank sets the bar for other credit institutions in shaping the parameters of banking products.
The rate at a particular bank depends on its policy and client status. Institutions are primarily interested in the reliability of the borrower, therefore, it will be possible to reduce the rate when buying a life insurance policy, some organizations offer more favorable terms to salary clients.
Currency of the loan affects the annual rate. A foreign currency mortgage is more risky, especially when issued for a period of 3 years or more.
Another factor is the loan term. The rates are lower for loans up to 15 years. You can win about 0.5-1% compared to a longer mortgage.
Benefits of buying real estate in the United States
One of the great advantages when buying real estate in the United States is that the country has a very good, easy and efficient information system to buy and sell houses or other real estate properties. A real estate buyer can get help from real estate agents, lawyers, financial institutions, insurance companies to help you acquire and maintain your US property very easily and hassle-free.
A non-American citizen does not have to live in the United States or be an American to buy property and own real estate. Many foreign investors buy real estate in the United States without being physically present in the United States, or buy up shares in a company and become co-owners of US companies. Many foreign investors buy real estate in the United States with the help of a local real estate agent.
In the States, tax deduction process is more complicated, where everything will be used when calculating the deduction. For example, it will matter who this mortgage is issued to and who pays for it. The standard annual tax deduction per person for the current year in the States is $6,100. If the mortgage is issued for two, and they both work and pay taxes, the amount is doubled. True, it will be possible to return so much only if there is official income from which deductions go to the budget.
There are also worse options – depending on which tax category you are assigned to by the relevant fiscal payments service, your annual tax deduction may not exceed $3,000, or even be as low as $750. In this case, the amount of interest payments will also affect the amount of the deduction. This means that by taking out a mortgage with a differential repayment method, you will receive less returns over time.