Need help with Planning Your Finances?
Need help with Planning Your Finances?
Real Estate
The buying and selling costs involved in a real estate transaction are covered in our Housing Costs blog. Find out how much mortgage you can qualify for using our Mortgage Loan Qualification Calculator.
Mortgage Loan Qualification Calculator
Your first step towards Home Buying Economics!
Mortgage Loan Qualification Calculator
Your first step towards Home Buying Economics!
Your first step towards Home Buying Economics!
In today’s low-interest environment, You can qualify for a home mortgage up to 7x net income (salary minus 2x monthly structured payment obligations, besides home mortgage) with a 20% down payment.
You can qualify for a home mortgage up to 7x net income (salary minus 2x monthly obligations, besides home mortgage) with a 20% down payment.
Down Payment: The down payment required for buying a home will need to come from Taxable asset. Your savings rate will determine how long it will take to save up for the down payment if your Taxable asset does not yet have sufficient funds.
The down payment required for buying a home will need to come from Taxable asset. Your savings rate will determine how long it will take to save up for the down payment if your Taxable asset does not yet have sufficient funds.
You also need to know how the housing costs will affect cash flow. As you read in the blog, the monthly cost of maintaining a home includes mortgage, property tax, insurance, HOA, warranty, landscaping and utility charges, some of which are additional to what renters pay.
Cash Flow: Evaluate how much the housing costs would change because of buying vs. renting from a cash flow perspective and how it affects your future savings rate.
Evaluate how much the housing costs would change because of buying vs. renting from a cash flow perspective and how it affects your future savings rate.
Monthly mortgage payment for every $1000 borrowed is about ~$5 at 4.5% interest rate. It changes by ~8 cents for every 1/8th of a point change in interest rate.
Monthly mortgage payment for every $1000 borrowed is about ~$5 at 4.5% interest rate. It changes by ~8 cents for every 1/8th of a point change in interest rate.
Understand the tax benefits of owning a home from our blog TCJA Changes to Real Estate.
TCJA Law: TCJA law limits mortgage deduction up to $750K in outstanding loan balance and not the original mortgage taken. As you pay down the mortgage, your outstanding loan balance will continue to decrease. Hence, even if not all of your interest is initially deductible, it will eventually be once your loan balance drops below the TCJA limit.
TCJA law limits mortgage deduction up to $750K in outstanding loan balance and not the original mortgage taken. As you pay down the mortgage, your outstanding loan balance will continue to decrease. Hence, even if not all of your interest is initially deductible, it will eventually be once your loan balance drops below the TCJA limit.
The tax benefit of holding a $750K home mortgage in today's low-interest environment means you are receiving a ~$1,000 monthly check from the Government for owning a home.
The tax benefit of holding a $750K home mortgage in today's low-interest environment means you are receiving a ~$1,000 monthly check from the government for owning a home.
Understand the True Cost of Home Ownership (TCHO). It includes permanent costs (interest, property tax, HOA, etc.) and the opportunity cost of equity. It is different from your mortgage payment which we used for cash flow analysis.
Rent to Buy ratio in high-priced home markets is 1:300, in today's low-interest environment. For example, paying $3,000 in rent is equivalent to owning a $900K home in true costs.
Rent to Buy ratio in high-priced home markets is 1:300, in today's low-interest environment. For example, paying $3,000 in rent is equivalent to owning a $900K home in true costs.
Investment homes do not have the same tax benefits as a primary home as the interest payment nets against rental income on your Schedule E. Compare the Historical Performances of Different Asset Classes before deciding whether to buy an investment property.
Investment Property: Calculate your rental ROI using:
Rental ROI = (Rental income – Interest – Property Tax – HOA/Other fees) / Equity
Calculate your rental ROI using: Rental ROI = (Rental income – Interest – Property Tax – HOA/Other fees) / Equity
In high-priced home markets, every $1 in monthly rental income will offset about $200 of investment property, in today's low-interest environment. For example, a $500K investment home needs to make at least $2,500 in rent to breakeven.
In high-priced home markets, every $1 in monthly rental income will offset about $200 of investment property, in today's low-interest environment. For example, a $500K investment home needs to make at least $2,500 in rent to break even.
Finally, the Tax Implications of Home Sale captures some of the tax advantages from selling a primary or an investment property.
1
How much more in savings do you need for your down payment? In which year will you be ready to buy a home?
2
What will be your new savings rate after you buy a home?
3
How does your rental ROI compare to other investments?
1
How much more in savings do you need for your down payment? Which year will you be ready to buy a home?
2
What will be your new savings rate after you buy a home?
3
How does your rental ROI compare to other investments?
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