[Wilton2ParkAve]

Actually I re-ran and it favors buying after 4 years.

[nish2006]

You take home $2900 a month and already have $15K saved? As Ali G would say... Respect, respect!

I add my vote to those before me... your current liquidity will not allow you to purchase a home that will either appreciate the way you want it to, or provide you with a safe & pleasant residence (at least not in this part of the state). Build up your finances further and aim higher up the housing ladder. With the financial discipline you've already demonstrated, you should be ready to make your first offer in 3-4 years.

[Cambium]

Originally Posted by Wilton2ParkAve

Cambium: Where is the impact of itemized deductions on the NYT tool? Big oversight. A 1% price increase is a reasonable expectation although below historical long term averages. A 1% rent increase is NOT a fair assumption. Let's re-run at 3 or 4% and see where the OP comes out.

Yeah, its a very nice tool with a bunch of options.

A 3% rent increase does not happen every year though.(I wish) That means a $1000 rent today will be $1030 next year. $1060 in 2 years. $1090 in 3 years. $1120 in 4 years. $1150 in 5 years. Ect.

Also make sure you have the common charges and utilites in there.
I dont think that site factors in utility rate increases, or common charge increases, or even tax increases. So try to even it out by lowering the appreciation rate of the home.

I hope you all didnt confuse my debate with me thinking owning a home is the worst thing to do. lol.

[Philbert]

Originally Posted by Cambium

Reminder for others... It's a liability until you own it outright which hopefully in 30yrs or less can happen. I know many people who take HELOCs along the way and its not an asset for 40+ yrs.

Or Maybe you're not aware that a $100,000 mortgage is actually costing you $170,000 total. So lets say you get lucky with a 100% gain. Your true profit is $30,000 IN 30 YEARS!!

You have to think of your personal balance sheet just like a corporate balance sheet. The house is an asset from day one, carried at market value. Your outstanding mortgage balance is a liability. The difference is your equity (which can be positive or negative).

your "profit" is still the difference between the selling price (or market price at whatever time in the future) and your purchase price. the size of the mortgage, both originally and at the time of calculation, is irrelevant to "profit." the payments of mortgage principal and interest are expenses, and by purchasing, you avoid the cash expense of rent.

[Philbert]

Originally Posted by Wilton2ParkAve

Cambium: Where is the impact of itemized deductions on the NYT tool? Big oversight. A 1% price increase is a reasonable expectation although below historical long term averages. A 1% rent increase is NOT a fair assumption. Let's re-run at 3 or 4% and see where the OP comes out.

You input your marginal tax rate in the advanced settings tab.

From the methodology at the bottom:

"Property taxes, the interest part of the mortgage payment, and in some cases, a portion of the common charges, are tax deductible. The resulting tax savings is accounted for in each item’s totals."

[Wilton2ParkAve]

Originally Posted by Philbert

You input your marginal tax rate in the advanced settings tab.

From the methodology at the bottom:

"Property taxes, the interest part of the mortgage payment, and in some cases, a portion of the common charges, are tax deductible. The resulting tax savings is accounted for in each item’s totals."

Although that claim is made, I'm not seeing it reflected in practice. After 5 years, the taxes are straight line summed.

[Wilton2ParkAve]

Originally Posted by Cambium

Yeah, its a very nice tool with a bunch of options.

A 3% rent increase does not happen every year though.(I wish) That means a $1000 rent today will be $1030 next year. $1060 in 2 years. $1090 in 3 years. $1120 in 4 years. $1150 in 5 years. Ect.

Also make sure you have the common charges and utilites in there.
I dont think that site factors in utility rate increases, or common charge increases, or even tax increases. So try to even it out by lowering the appreciation rate of the home.

I hope you all didnt confuse my debate with me thinking owning a home is the worst thing to do. lol.

I haven't rented in 10 years, but my experience was increases of 5-10%+ annually. That applied to a large complex in Stamford, a small 4 unit complex in Trumbull and Manhattan. I think 3% is very reasonable for an assumed rent increase rate particularly since demand is much higher post housing debacle.

[Philbert]

Originally Posted by Wilton2ParkAve

Although that claim is made, I'm not seeing it reflected in practice. After 5 years, the taxes are straight line summed.

I don't know, it works for me. But be careful with the home price appreciation - property taxes remain a fixed % of home value, so they rise with house appreciation.

So, to keep things simple, I tested this example:

$100k home price
2% property taxes ($2,000 nominal)
25% tax bracket
0% appreciation

As expected, property taxes show as $1,500 in year 6 and $9,000 cumulative in years 1-6.

I also ran the same scenario with 2% home appreciation and get $1,689 in year 6 and $9,651 cumulative in years 1-6.

[MrGompers]

Originally Posted by UconnHusky1

Great job saving 15k! I would however consider this your emergency fund so leave it alone....open an ING account or something.

Continue to live at home if possible or rent with a friend if you living at home isn't an option. In the interim, max out your Roth IRA, max out your 401k up until employer match, and also save for a mortgage.

When you turn 25 you will be thanking me. When you near retirement you will be thanking me again.

I didn't read all the responses, but this is exactly what I would recommend as well. Generally speaking, if you don't have an employer sponsored 401k you can contribute to a 401k account yourself thru a brokerage like Vanguard, Charles Schwab, Fidelity, etc.

If you are eligible for an employer sponsored 401k you can contribute to a Roth IRA but not a traditional 401k account. If you need specific guidance i'm sure you can give a CPA a call to verify.

If I was 20 and making a decent salary I wouldn't tie myself down with a mortgage. Imagine if your dream job became available tomorrow and was in California. If you had a mortgage do you think you can accept that job? Whereas, being a renter or living at home with your parents you can leave easily.

[Wilton2ParkAve]

I see the same, but where is the tax benefit of paying RE taxes and mortgage interest?