I'm not an economist yet, but I play around with numbers every year. Lots of numbers.
No, it's not taxes.
That's what Tom does. He knows the federal money grabbing system better than any other human I have ever known. He teaches the new employees of the IRS how to do their job! Tom has saved my butt and huge amounts of money. For taxes I go to Tom.
These numbers pertain to details of home finance. Or refinance to be exact.
For every year that I have lived in my home I have refinanced. Each time dropping the interest rate by one full point, or more. Accordingly the monthly payment on the loan also decreases substantially.
Upon acceptance of the paperwork I have recently signed, my mortgage payment is will drop below what I was about to pay in rent four years ago. Sure the first year was a little awkward but the colossal savings in federal tax made up for the tight cash flow during that time.
Think double.
Don't ever let anyone tell you that you cannot buy a home. If they do, consider said person to be a mouthbreather who knows little of the business he or she pretends to be in — walk away and find someone else. Or contact me and I will point you to the right guy.
Purchasing a home is big. It's full of details and decision making that is outside the realm of expertise for many. I bought a home because one Saturday afternoon I asked a kind real estate lady how a person buys a home because the apartment management had just announced another rent increase. Before then I knew zero about the subject.
But like anything else, hectic decision making becomes second nature and then you start seeing the opportunities that make life easier and more affordable. And then you find yourself talking about the 10 year bond rate, fixed and adjustable interest, tax incentives and what not.
And by that time you'll know enough to become the master of your own economic destiny.
Speaking of tax incentives, I know of one that happens on the 15th. It's not well documented or known to many but it's a good program. The details of which can be found here (look at the unique facts on the right side).
Join the fray by reading through and commenting at the end.
That rocks, Greg. Now if only home purchases made on 4/15 were 100% tax deductible...
(Who's Tom?)
This is my first post on your site, which I have been reading for quite a while. Excellent stuff.
I must admit, almost everyone I ran into said that I can't buy a house. Yet, my rent is the same amount as a house payment and I still have plenty of money left over every month. They site things like school loans and co-signing for my brother's car so that he can get to school and get an education. I guess I'm bitter about the whole thing, but it doesn't seem right to penalize someone for trying to get an education to better themselves in life. Shouldn't those things be rewarded instead?
Everyone can buy a house? Do we live in the same city? I looked at 1,735 sq ft house in my neighborhood that is going for approximately $660,000. That's one hefty mortgage payment even with at a low interest rate.
By the way, I need Tom's phone number because I've been doing my own taxes for the last 3 years and the taxman still collects!
Well I never said everyone can buy a house in the most expensive neighborhood or markets. Buying a home in or near urban California is beyond nuts.
"For every year that I have lived in my home I have refinanced"
How many years have you lived there? I hope not many, since for every refinance, there are clossing costs and/or points to buy involved. You may end up paying more that you bargained for... :-)
I've lived here four years and have yet to pay a dime in closing costs or points for any of the refinance.
Is that a real tax incentive?
Jason, If you are referring to home ownership being a tax incentive then yes. Purhcasing a home is the single largest tax incentive you can get in the United States.
No, sorry, I meant the birthday incentive on your Amazon wishlist.
I own my own home as well and love doing my taxes as a result. :o)
I have to agree with your assertion. I fell into the trap of thinking that buying a home "tied me down" too much in my mid-late twenties. COnsequently, I missed opportunities to purchase properties that have since appreciated more than triple.
Fortunately, I married a woman who purchased a US $ 60,000 home while making US $ 18,000/year. Her house payment was in the $400 range, and she rented out the second bedroom to college students. She was able to live formuch less than she was renting a $650/month apartment. We sold that home for more than triple the purchase price seven years after she bought it and put the proceeds down on our current home. She always says that it was the smartest financial thing she ever did, and I agree.
I'm not saying that to brag, since I had nothing to do with the smart decision-making. I'm just saying that to illustrate that rent is a scam and that in most markets (NOT urban California, NYC or Boston), you can own a home for the same monthly cost or LESS than it would cost to rent an apartment.
And the tax implications are major, not least of which is the opportunity for access to the HOme Equity LIne Of Credit, which is, to me, the "last great loophole." With such an account, one has access to vast sums of money (a loan), the interest payments of which are a tax deduction. When I was unemployed for a spell in the year 2000, this saved my ass.
but what about homeowners/neighborhood association fees? insurance: fire, liability, etc. how about constant upkeep and maintenance? what about actually moving in and buying appliances, etc.
i currently split rent in a nice condo w/ my girlfiend. we have been debating whether or not to buy a house for quite sometime now. we see that rent is a scam, and we could be investing smarter. but, all the extra expenses, maintennace costs and everything involved is a little daunting. it seems it is very hard to accurately estimate the true cost of owning a home, not just the monthly mortgage payment.
since we moved in, my landlord has spent around 10,000 dollars on a new AC/heating sytem, miscellaneous fixes and upkeep, extermination, etc. That doesn't inlcude what she spent on a brand new stove, firdge and dishwasher just before we moved in. we have paid her a total of around 12,800 dollars in rent since moving in. (about a year and a half ago).
Something goes wrong with the AC. We call landlord. She pays. A leak in our neighbors plumbing system causes a small section of our celing to rot and decay. We call landlord. She pays. We see some ugly nasty bugs. We call landlord. She pays. Etc.
It seems there is a tradeoff. And a lot more is involved that the mortgage payment.
Jason wrote:
I own my own home as well and love doing my taxes as a result. :o)
Oh my goodness... call the doctor, the infection rages in this poor man's body. It's affected his thinking... quick!... the anti-septic! :)
(I will not attempt to redirect this thread towards a flat-tax discussion.)