When the $8000 first time home buyer tax credit was introduced last year a sigh of relief was felt throughout the real estate industry. Everybody was happy - buyers, sellers, agents, mortgage lenders, appraisers, etc. At the end of April 2010 it literally felt like a wild west gold rush as everyone was scraping the bottom of the barrel to buy a home so they could get their hands on that $8000.
Well, since then inventory levels have risen even higher than before the tax credit, showings on homes for sale have all but dropped off completely and hardly anyone is out buying homes despite the lowest interest rates IN HISTORY! So I wanted to show a comparison of how by buying a home now will make you more money than if you had purchased a home during the $8000 tax credit. Plus, this "benefit" applies to EVERYONE - not just first time home buyers.
The Scenario If you Bought During the Tax Credits
You purchased a home during the first time home buyer tax credit or took advantage of the $6500 "moving up" tax credit.
Your loan amount was $150,000 at 5.5% interest for 30 years.
Your monthly payment is approximately $1070 a month.
If you stay in that home for 30 years you'll end up paying $385,356 for that home and pay $170,793 in interest.
You get an $8000 tax credit if you were a first home buyer or you get a $6500 tax credit if you were a "move up" buyer.
The Scenario If You Buy Now
You purchase a home now taking advantage of the lowest interest rates in history.
Your loan amount is $150,000 at 4.25% interest for 30 years.
Your monthly payment is approximately $956 a month.
If you stay in that home for 30 years you'll end up paying $344,397 for that home and pay $130,835 in interest.
The average length that a home owner owns their home is about 7 years. So, in the scenario above by purchasing now you save $114 a month vs. if you had purchased during the tax credit. This is a savings of $1368 a year and after 7 years this is a savings of $9576.
The savings you get by buying now when rates are low clearly outweigh the benefits of the tax credit in the long run. Buying now with low interest rates clearly will save you tens of thousands of dollars the longer you own the home.
So, it's obviously an advantage to buy now vs. buying last year, so where are the buyers? BUYERS - Look at the big picture and feel confident that purchasing a home now is probably going to be the best time to invest in real estate in history and you can have those bragging rights the rest of your life!
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