$8000 Tax Credit is yours! Add that to a couple of things that people forget! Building Equity and the Interest Deduction!
Besides the federal tax credit there are two very important aspects of buying that you may forget about.
1. Interest deduction is big. You get to deduct your interest on your taxes for every year till its paid off. The deduction is based on your tax rate. If you are in the 25% bracket and you pay $10,000 then your savings would be $2500 per year. Taxes are also deductible as well.
2. Building Equity. Your note is is interest and principle. Each Month you are paying down your note. The amount of equity increases with every payment. If you borrow 200k you are paying down your mortgage by more than $200 per month. Its paying down the mortgage by at least $2500 in year one. This is building equity.
Federal Tax Credit $8000/$6500
The $8000 First Time Home Buyer Tax credit was approved and is now on the President’s desk for signatures. For first timers, the $8000 tax credit is extended until April 30th, 2010. The major addition is a $6500 Tax credit for existing home owners. Effective the day of the signing, this gives current homeowners, that have owned their current home for more than 5 years, a credit and incentive to move up or sell their home.
This is nice for homeowners to help with their closing costs. Income limits have also been increased to $125,000 single or $225,000 married and you can claim this credit on any home up to $800,000 in price.
Now you add up thses savings and if you qualify you could have all three of the savings of owning in year one. $8000 plus $2500 plus $2500 equals $13000 for this example. Its hard to beat that return !