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The mortgage interest deduction is gone, for the most part. If you are not paying a lot in interest, you are likely to take the standard deduction, which is now $24000. You would have to have a large mortgage to pay that much interest. $750k @4% is $30000 per year in interest. Most people don't come close to having that large of a mortgage. So a mortgage interest deduction isn't likely to save you any money these days.
No. Mortgage deductions is still there. Yeah it's limited to $750K loan max but for a lot of people that's still a big chunk of deductions. You don't have to take the standard deduction, you can still take itemized deductions.
Location: Formerly Pleasanton Ca, now in Marietta Ga
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Originally Posted by HB2HSV
No. Mortgage deductions is still there. Yeah it's limited to $750K loan max but for a lot of people that's still a big chunk of deductions. You don't have to take the standard deduction, you can still take itemized deductions.
how many people will get a loan for $750k
A more common number might be 300 to 400K. At 400K the mortgage is about 24K a year which is a wash for the standard deductions vs itemized.
No. Mortgage deductions is still there. Yeah it's limited to $750K loan max but for a lot of people that's still a big chunk of deductions. You don't have to take the standard deduction, you can still take itemized deductions.
SALT limitations will also put the brakes on a lot of people for tax deductions for primary residences for 750k+
Last edited by Lowexpectations; 07-21-2019 at 07:54 PM..
how many people will get a loan for $750k
A more common number might be 300 to 400K. At 400K the mortgage is about 24K a year which is a wash for the standard deductions vs itemized.
How many millionaire renters out there who never owned any property whether it's a rental or a place they lived in? How many millionaire renters have the discipline to put aside money to invest?
Silly comment.
I've been a renter all my life and because of that choice I've had the ability to invest my money in an historically better place to invest than real estate---the stock market!
Owning a home is great for memories, raising a family, building equity, etc but owning a house demands constant upkeep that requires more money to keep pouring into your "investment".
You have to pay for insurance, taxes, maintenance, utilities etc. Even if you paid off your house, sold it and got the money back, you still need to buy another house to live in. Prices went up so even after downgrading to a smaller house, you still have to pay a lot of money out. I can understand where someone obtained a house from someone or bought the house price full in cash. In some places, a basic 20 percent down payment would be the same as an entire house in other areas.
Hey Op. Like any investment, buying a home could be good or bad. I think the biggest factor for 1st time buyers is longevity. If you have found the area where you want to call home and believe you'll be there for the next 5-10 years, it generally makes sense to buy something. The criteria of where to live differs for everyone, but generally it is economic prospects. I bought my first home in San Jose when I realized the woman I wanted to marry, with her little store, wasn't going to want to move.
You are right in that, buying a home, watching it go up and selling it only to move into another local home is unlikely to make you much money. On your primary home, your biggest "income" component is...in a way...that you've made a large hedge against future rent increases. So, if you buy a home at age 30 on a 30 year lease, chances are had you rented the same unit, it is going to be much higher priced 30 years down the road. Using the Bureau of Labor statistics, a $1,000 rent in 1990 would be approximately $2,370 today. If you had bought a home with a 30 year mortgage, you may end up paying more like $1,400 in 1990, but you'd still be paying that today with your final payments and it is about to fall to only the ownership expenses.
Therein is the "cheaper" to rent factor as well. That $1,000 rent was likely purchased many years before that.
To get an idea of how long you'll have to stay to have made a wide decision, there are two things to consider. The first is your local ratio of home prices/average household income. The national stat doesn't really help you, as real estate is local.
The other simple statistic I like is to look at home price vs gross rents. If it pays for itself in less than 10 years, it's a buy. If it's higher than 20 years...watch out, you may be buying a luxury not an investment.
The final thing I'd say on luxury is that buying a home with a $2,000 payment to avoid $1,000 rent may not be a good idea. For your first buy, consider buying a small home/condo that is in good shape. If you buy something "beneath" you but still nice enough to live in, when you want to expand or change, you may decide you want to rent your little place rather than sell it and hopefully have the flexibility in your budget to do so.
My boss like to brag about owning a $2M home he bought for $1.1M in 2014. I finally asked him if he would ever rent the first home. He didn't think so, it was too nice. I asked him what is future expected cash flows were from the property...we're both accountants after all. He said 0 until he sells...but he had no plans to sell as he wanted to live there forever. Does he really have an asset?....or does he simply have a hedge against the cost of renting the same place.
Alternatively, I had bought a couple years before then. I do not own any $2M homes. What I own is a perfectly sized home for us and some nice rentals that I keep well maintained and with nice appliances etc. I do pay a little more to do that, but the rents pay all of the mortgages, all of the expenses...and I have some left over...even after including my personal mortgage. I'd argue I have both a hedge and an investment.
That timeframe was also a good time to buy....say stocks. If you timed the low with your downpayment, it could be up a massive 400%+ now. So for $100K home, you could have 20% down, or $20K worth $80K now. Using the previously posted numbers, home prices have only gone up 21%...but that's 21% on $100K so you're at $41K now plus you have been hedged against the largest expense for most people. Housing costs. Had you bought the stock and not the home, your expenses would have increased by more than your housing gain....and the cost to make your new hedge later would have increased. In this example, it's still a small win for stocks, but not nearly as large as one would think given the start numbers. However, in reality, real estate again is always local. In this area, home prices have surged 300% in that same time frame. So that's 80K for stock route vs $300K for the housing price. Of course, pouring money into AMZN when it traded in the 30's would be more impressive still. Alternatively, my first buy dropped further after I bought it. If I'd lost my job and had to leave the area, I would have lost money.
So the point is, that it's hard to do a straight comparison between which is better, but if we look at the broad population of the US, it does appear that homeowners in general accumulate much more wealth than their renting counterparts. So the easiest thing to do is ask yourself....will I be here 10 years from now. If the answer is yes, you should probably buy a home.
So, not to burst your bubble on the first part, but if you rent, you're also paying for the landlord's insurance, taxes, and maintenance, and you're ALWAYS paying for your own utilities.
Usually, but I have seen water included where an owner wants to ensure that the lawn and other valuable landscaping is maintained. Some landlords also include yard maintenance, at least mowing. It just depends.
Location: Formerly Pleasanton Ca, now in Marietta Ga
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Originally Posted by HB2HSV
Very common for high cost States like California.
Yes but let's not forget not many areas are like metro Ca. Ca itself is not necessarily that expensive. You can get a pretty nice home in Fresno for under 300K in a good part of town.
Location: Formerly Pleasanton Ca, now in Marietta Ga
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Quote:
Originally Posted by FREE866
Silly comment.
I've been a renter all my life and because of that choice I've had the ability to invest my money in an historically better place to invest than real estate---the stock market!
Owning a home is great for memories, raising a family, building equity, etc but owning a house demands constant upkeep that requires more money to keep pouring into your "investment".
if you are talking about considering about housing that you live in, then perhaps. But if you are comparing the stock market to rental housing, my rental houses as well as others have beaten the heck out of the market.
How many millionaire renters out there who never owned any property whether it's a rental or a place they lived in? How many millionaire renters have the discipline to put aside money to invest?
I'm not a $1M yet, but I'm half way there. I'm fine being a weiro. For that matter, people who save/invest a significant percentage of their income are in the minority--somewhere between 1/4 and 1/3 (at most). So, to even reach financially comfortable status, you have to be a weirdo, whether you're a homeowner or not.
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