Jun. 1, 2010
Things are often more complicated than they seem. For example, an article I read today suggests that homebuyers who missed the federal homebuyer tax-credit deadline may actually save money.
How's that? Well, interest rates are lower now than just before the deadline. So in the article's hypothetical example of a $350,000 home and a $70,000 downpayment, the homebuyer realizes $1,467 in annual savings because of today's lower mortgage rates. Total savings over 30 years is $44,003 … significantly more than the $8,000 first-time homebuyer credit or the $6,500 that was available to existing homeowners.
Like I said, though, it's not that simple. First, lots of people don't pay $350,000 for a house. The median Texas home price is less than $150,000. It's also common for a homeowner to sell long before paying off that 30-year mortgage. The median length of homeownership is seven years in our state.
So if the article instead focused on a lower-priced home and its smaller annual savings due to lower interest rates … and fewer years owning the home … the savings from that hypothetical example start to look hypothetical indeed.
Any savings also depends on your exact mortgage rate. Rates change more frequently than every month. In fact, they can vary during a day. Also, raters have been under 5% for several stretches since the tax credit began.
These variables make a comparison muddier than the article suggests. This much is clear to me, though: Interest rates are incredibly low. When I purchased my first home, my loan carried a rate nearly double today's rates.
Also, just because the federal tax credit has passed doesn't mean there's no assistance available. You can search TxHomePrograms.org to see if there's a program you qualify for.
I could create hypothetical scenarios where a homebuyer's savings now totaled a few bucks more or a fistful of dollars less than when the tax credit was in place.
The point is that it depends on many factors. It was a good time to buy a home before the tax credit, and it's a good time to buy a home now … if it's a good time for you based on your personal situation.
