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The following shows what happens to your payment if your rate goes up by the time you buy (in ½% increments)
Rate.......Pmt.........Loss/mo.......Cost/YR.......Cost 7/YRs.......Cost 30/YRs
6.0%....$1,133...........$60.............$720.............$5,040...............$21,600
6.5%....$1,194...........$121...........$1,452.........$10,164.............$43,560
7.0%....$1,256...........$183...........$2,196.........$15,372.............$65.880
This number you must look at from the long term picture. If you wait 6 months to buy a home, it is possible (or even likely) that the rates will be up .5%. The cost/loss to you IS NOT $60 per month. The cost is $60 per month times however many months you own the home. The average American owns a home 7 years, so that loss equals $5,040. If you keep this home as a rental property (a great idea especially for your first home and when rates are this low) then the loss is times 30 years, or $21,600. Of course if you look at it like a good financial planner would, your loss is not simply the $21,000 but it's that amount times the opportunity cost of lost interest had you invested that money yielding 5%-10% appreciation compounded annually. This of course multiplies the loss to 2 to 3 times the actual cash loss!!!! Search Right Here
And if you are waiting until "next year" to buy that rental property..."Hello,...McFly!?!" Atlanta Homes
3) Appreciation Lost (Assuming a $200,000 sales price)
Appreciation.......Per Month.......................6 Months.................1 year
4) Tax deduction/interest write off
This is the trickiest of the calculations because everybody's tax situation is different, and the tax code is a tad bit complicated. But as a general rule, you can write off 100% of the interest portion of your payment. And if you didn't know, the interest portion is MOST of the payment (for the first few years anyway)
For example: using the examples above, with a $1,073 per month payment ($190k loan @ 5.5%), the interest portion of the first payment is around $850 per month. So that's the write off that you will NOT be getting per month until you buy. Most people buying this price home are in the 28% tax bracket plus 6% state. That means the actual cash loss is the monthly payment times your tax bracket. Let's say 33%. So in this example, you are losing $280 per month CASH in tax deduction that you are not receiving. That's not even taking in to account that writing off $10,200 per year ($850 times 12 months) would probably take you in to a lower tax bracket; consequently, you would pay taxes at a lower rate...... (again, I am not an accountant nor do I ever want to be one; so, consult a CPA regarding your particular tax situation)
So,....Your "lack of deduction loss" is appx..... $250- $300 per month Atlanta Condos
SUMMARY: IF YOU WAIT 6 MONTHS TO BUY, YOU ARE LOSING BETWEEN $8,000 AND $15,000 IN THAT TIME ALONE! IF YOU MISS TODAYS RATE, IT COULD COST ANOTHER $15,000 TO $100,000 MORE OVER THE LONG HAUL.
One last point: Affordability and lifestyle
I do not recommend ANYONE BUYING A HOME that they can not afford, or that will make them ‘house-poor'. I recommend that you should be fairly conservative. This means add up your PITI (total mortgage payment with taxes and insurance added in) and your payment should NOT be above 30% of your GROSS monthly income (before taxes).
Remember this, though: If you ‘wait' to buy, that $200,000 home will most likely be $210,000 next year (5% appreciation). So the question you must ask is, "Is my income going up 5% per year?" If not then you will be able to afford LESS in a year than you can now. http://www.bucheadrealtyassociates.com/
**This is not intended as an earnings claim on purchasing real property. Past results are not in indication of future performance.Please consult your tax advisor. (ask about the W-4 form).
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