The 1st Time Home Buyer's Tax Credit is scheduled to expire 12/1/2009. While it may be extended, I would say that there is an event coming that is of greater importance. Interest rates are going to rise; it's only a matter of time. An increase to 6% or more wouldn't be surprising. That increase in interest will affect buyers and sellers alike. Buyers will be faced with higher mortgage payments, or in order to control costs, they'll have to settle for lesser priced homes. Sellers will find a market that is dampened by the higher interest rate, making a sale that much harder. 6% is still a very good rate, but to put it in perspective, let's look at how it will affect one's monthly payment.
On a $200,000 mortgage, at a 5% interest rate, one's monthly payment (principal and interest only) would be $1074. At 6%, that monthly payment would increase to $1199. That's $125 per month extra, x 12 months = $1500 per year. Over the course of a 30 year mortgage, that extra percentage point of interest translates to $45,164. That's a huge difference, far outshadowing the maximum $8000 tax credit.
So what's the moral of the story? It depends on how long one plans to live in their new home. If the intent is to sell within 5 1/2 years, then the tax credit has the bigger, more immediate impact. If, however, one plans on remaining in their home for a longer period of time, then the interest rate has the bigger overall effect.
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