Should you join the ranks of renters who have become homeowners? If purchasing a home is within your budget, there are some very good reasons to buy now.
- The cost of homes is much more affordable than it has been in the past. The number of households that can buy an entry level home in Contra Costa county has increased to 47%, up from 17% in 2006.
- Mortgage interest rates remain at record lows. Why do you care? The monthly payment on your mortgage determines the sales price that your mortgage lender will approve. Here is a great rule of thumb to remember: a 1% increase in the interest rate = 10% decrease in the price of home you can purchase [read more].
- Owning your own home gives you a sense of stability and community. Not to mention it’s FUN to paint your walls any darn color you choose!
- There are income tax benefits from home ownership that help offset the increased house payment – but AVOID using the “rule of thumb” calculation because it is often inaccurate (more on this below).
We love helping people buy homes but it is a significant financial decision and we think it’s important to help you make that decision based on accurate financial information.
The “rule of thumb” calculation generally used to calculate the income tax savings due to home ownership is:
(Mortgage Payment + monthly property taxes) x your “effective” Income Tax Bracket = monthly income tax savings
Why is the “rule of thumb” calculation generally wrong?
Aside from the fact that few people actually know the difference between the marginal and “effective” income tax rate for both their State and Federal taxes (big problem – it makes a significant difference!), the tax deductions from home ownership replace the standard deductions you receive when you don’t itemize deductions on your taxes. The “rule of thumb” calculation doesn’t take this into account.
In order to help you make an informed Rent or Buy decision, we have created a Rent vs. Buy Calculator that allows you to input your income, dependents, deductions and different home prices to help you determine your tax benefits from home ownership and the best home price for your budget. Request it now – its FREE and you can use it in the privacy of your own home.
Disclaimers:
The Rent vs Buy Calculator is programmed for California residents only. While the Rent vs Buy Calculator is much more accurate than the “Rule of Thumb” calculation and a good starting point for comparison, we are not tax advisors. Please consult with your tax professional regarding your personal situation.
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