A month ago I wrote about why you should not buy a home.  Of the ten reasons for not buying at the time, there has been a little movement in one of them.  The first reason was that interest rates were too low, and that there would be a better tax deduction if rates would go higher.  If you're waiting for that big opportunity to score in the tax deduction game, it may be on its way. 

There is a good chance that the result of the Washington circus will be increased interest rates.  Even with a last minute agreement by the unenlightened do-nothings, there could be a downgrade of US debt.  It's estimated that the increase in treasury bond interest effected by a debt downgrade could affect mortgage interest rates with as much as a 1% increase. 

In real money, a 1% increase on a $200,000 loan will get you an opportunity to deduct somewhere around $1,200 extra at tax time.  Of course, you will have to pay an extra hundred or so dollars every month for the privilege.  If you're pushing the limit of affordability and can only qualify for a $200,000 loan at 4.5%, well, you'll only qualify for somewhere near $180,000 at 5.5%. I'm not a home loan specialist, but I think these numbers are reasonably accurate.

On the other hand, if you're fairly good at math and economics, you probably recognize that now may be the last great chance to spend less on that lifestyle upgrade you've been thinking about.  If there's a possibility of a new home purchase in your future, call me for a complimentary home buying orientation and strategy session. 

E.J. "Mike" Carlier  Lakeville, MN

Keller Williams Preferred Realty 

612-916-3033

http://www.prettygoodhomes.com

 
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4 Comments on One less reason for not buying a home

JUL
30
2011
373,824 Points 10 Featured Posts Outside Blog Hit Router Called Shot Master

That is funny and I actually had a customer tell me this very thing???? I don't mind paying the higher rate as I get to deduct it. I responded if you pay 25% in fed tax and got an extra 2000 in deductions then that means you paid 8000 for that privilege. He still didn't get it. wow.
1:32pm • #1
1,515,462 Points 112 Featured Posts Localism Sponsor Outside Blog Called Shot Master

That downgrade in our country's credit rating is coming one way or the other and the interest rate hike will follow.  If buyers are looking at a house and just waiting, now is the time to jump off the fence and do it.
1:36pm • #2
291,825 Points 20 Featured Posts Outside Blog Called Shot Master

Mike

All we can do is hope it doesn't happen.  And then, in Nov 2012, send all the "unenlightened do-nothings" back home. 
1:38pm • #3
383,822 Points 8 Featured Posts Called Shot Master

(US) David, that type person is the same one who overwithholds and thinks he's actually getting paid by the government when he gets his return. 

Chris Ann, I would be wrong if I told you I thought you were wrong. 

Lloyd, I don't think it matters.  The do-nothings will be replaced with less experienced do-nothings.  There does not seem to be any brilliance evident in the last bunch of replacements. 
2:17pm • #4


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