Mortgage Updates

November 8th, 2009 5:05 PM
Yes, buying real estate is a big commitment but many times not buying real estate is a bigger mistake. Let’s compare the costs of renting a property in today’s market versus buying the same property today.
 
First to establish an example. My figures will work with any example, but let’s use a home that would rent for $2,000 a month or would sell for $400,000 at 3% down.
 
What would your cost per year be to buy when compared to the $24,000 you would pay in rent?
 
Let’s use very oversimplified figures:
            Interest: 5% on $388,000 =     $19,400
            Property Taxes =                    $ 4,000
            Insurance =                           $ 1,000
                                                       $24,400
 
There are other factors to consider. For example, IRS tax relief for the deductible items above. Let’s use a 25% IRS tax rate and an 8% California tax rate. Interest and property tax payments are deductible so 33% of the $23,400 would result in a tax savings of $7,722. That brings the outlay each year to $16,678. That is less than renting. 
 
Now let's add the $8,000 (potential) Federal Income tax credit if you have not owned a home in the last three years.  That's huge.  That means, not only will you get your normal tax refund from our good uncle Sam, but an additional 8K! -Wow.  (Information on updates for new extension to follow in my next blog.)
 
The major point of this posting is that the tax benefits of ownership are important when budgeting for yearly housing costs.  But, there are other reasons to buy.  Do you want a home?  You know somewhere that you can choose the paint colors, hang the pictures and raise children.  A place where you and your spouse can have celebrations, Christmas, birthdays and events like babies, sweet sixteen parties and weddings.  To have a place where "kids"  come home and grand kids come visit is more than a house.  It is a home.  
 
If you want a larger home (and believe that you can rent your current home to cover your monthly out go) consider moving up.  There are some great programs requiring very little investment and gosh, your dream home could be within reach at an almost unbelievable price. 
 
So consider buying now not later, when prices are at their lowest.. and financing is great.
 
Any questions? Call your friendly and capable real estate agent. Good luck, each and everyone.
Posted by INGRID PIERSON on November 8th, 2009 5:05 PMPost a Comment (0)
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