Think you missed out on the tax credit? Think Again

While talking with a lender friend today we were discussing this months buyer motivation and demand. There seems to be a thought process from alot of Realtors, Lenders and consumers that the 2010 buyers are, well GONE.  We both completely disagree! So Gary ran the data and wrote a post about it and asked me to share it.

Please read the data facts below and react accordingly. Meaning hurry up and call me so we can help you buy that house while interest rates are AMAZING low.

Low Mortgage Interest Rates Create More Incentive Than First Time Homebuyer Tax Credit

With interest rates dipping as low as 4.25% to 4.75% on a 30 year fixed, the tax credit gone should not make much of a difference in the minds of home-buyers. However, that has not been the case.  So far the mortgage application volumes since the tax credit ending has been very low.  Most borrowers have not yet realized that due to the low interest rates that the long term benefits of owning a home is more beneficial today than the customer who bought their home 3 to 6 months ago.  The reason for this phenomena is due to interest rates creeping down to all time low levels between 4% to 5%.  Most homeowners who took advantage of the first time home-buyer tax credit paid for mortgage rates in the ranges of 5.25% to 5.75% range.

So let me give you 2 great examples using a $90,000.00 loan and a $180,000.00 loan of the benefits today buying a home versus the tax credit of yesteryear.

Example #1:

First Time Home-buyer bought a $100,000.00 home and put 10% down during the first time home-buyer tax credit.
The loan was for $90,000.00 at a rate of 5.5%.  That Principal and Interest payment is $511.01.  This borrower earned the $8,000.00 tax credit.

vs.

The same First Time Home-buyer bought a home today at $100,000.00 and put 10% down.  The loan was for $90,000.00 but now the estimated rate is 4.75%.  That Principal and Interest payment is $469.08.  The borrower did not earn $8,000.00 but
is now saving $41.93 a month.  over 360 payment or 30 years, this total:  360 payments X 41.93 =  $15094.80 in payment
savings.

This is basically 2 times more beneficial than the first time home-buyer tax credit.

Example #2:

First Time Home-buyer bought a $200,000.00 home and put 10% down during the first time home-buyer tax credit.  The loan was for $180,000.00 at a rate of 5.5%.  That Principal and Interest payment is $$1022.02. This borrower earned the $8,000.00 tax credit.

vs.

The same First Time Home-buyer bought a home today at $200,000.00 and put 10% down.  The loan was for $180,000.00 but now the estimated rate is 4.75%.  That Principal and Interest payment is $938.97.  The borrower did not earn the $8,000.00 but is now saving $83.05 a month.  Over 360 payments or 30 years, this total:  360 payments X $83.05 = $29,898.00 in payment savings.

This is basically 4 times more beneficial than the first time home-buyer tax credit.

The hard part is predicting the interest rates, and these rates will not stay this low forever. If you felt you missed out on the tax credit, quit kicking yourself.  You can still get that home and get the same benefit.  Yes it is not instant money, but it also does not come with tax consequences if you sell your home early (please seek CPA about that).

The reason I shared this is because I feel we all got sucked into believing all the gimmicks and tax credits as a sole reason to buy a home. The real reasons are right in front of you.  With prices and interest rates at all time lows now is the time to act.

Gary Miljour- Mortgage Lending for Tempe Arizona

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