Housing Costs-Home Owership Verus Renting

[sudsmaster]

I have been under the impression that here in California the bank technically owns the property until you pay them off in full. They hold the deed in trust (or the homewoner does). All I know is that I signed a big stack of documents with a real estate agent and a bank that I trusted. My impression is that I have all the liability and responsibility of ownership, along with many but not all the freedoms. I must take out homeowner's insurance to keep the mortgage, for example, because the house is collateral on the loan. Maybe I do own it. I don't know. I know I'll be very happy to have the darn thing paid off. I know I gave a little smile when my principle payments finally exceeded the interest payments - even though this means less of an income tax deduction.

Speaking of which, the mortgage interest deduction "pays you back" only in relation to your tax bracket. If you make a lot per year, the value of the deduction is proportionately higher, at least in dollar terms of lower taxes.

I think I have pretty reasonable mortgage payments, and I've figured how much my mortgage, property taxes, and h.o. insurance are costing me per month. But I haven't figured out exactly how much the mortgage interest and taxes reduce my taxes by being deductible - in part because my income has fluctuated so much in the past five years. But whatever it is, I couldn't have the space and freedom if I rented as I do owning the home.

That said, I recall that while I was renting from the landlord from hell, periodically I would realize that the place, for me, was really relatively low maintenance and that gave me a lot of leisure time (which unfortunately was mostly spent dealing with a daily 3 hour commute). Now that I own, I've spent a LOT of time on the house and the landscaping. It's fun, but it's also indicative of the much increased responsiblity and time demands owning a home can impose. Of course, I could have left the property treeless, with a pond full of stagnant water, and had lots of time on my hands.

 

[washabear]

I like being a homeowner. The aforementioned benefits of being able to do anything you want with your house are great. And I do find that in my area, rents for an ordinary two-bedroom apartment often surpass what one’s total mortgage payment could be for a modest but very nice townhouse, which is what I have. That could be changing, though, because entry to homeownership is getting more and more difficult here in Maryland as the DC commuter radius continues to expand, driving up prices in previously reasonable distant areas. Even house prices in southern Pennsylvania are high now as people continue to buy farther out. That is good for present homeowners but bad for those trying to get in.

Of course, the need to perform regular maintenance and “housekeeping” is something to consider, too. Most of the time, it’s not a big deal. However, there are always unforeseen circumstances, those little disasters that happen at the most inopportune times. For those times, I think it is important that homeowners keep a “rainy day house fund,” some liquid money available for when the unexpected strikes. Just something else to consider when thinking about buying a house.

 

[launderess]

Do Not Forget AMT

As in Alternative Minimum Tax.

Start earning too much money and then you are hit with AMT, which will cause you to loose most deductions, including those realted to mortgage/housing.

 

[toggleswitch]

When I did tax preparation in a CPA firm....

The saying was the "Alternative Minimum Tax." is neither.

 

[frigilux]

I lived in a ground-floor warehouse apartment for nearly 14 years before I bought my house. I was living in a 1-bedroom apt. above a business, and when the business moved out, I approached the landlord about turning the first floor into a warehouse-style apt. for me. Being a bit eccentric, he agreed, came up with plans and asked only that I agree to live there at least 2 years. He was a fantastic landlord; He gave me the numbers for the plumber, electrician and fix-it guy he used and said "When anything needs to be done, just call them."

My landlord passed away in 2001 and I wanted to purchase the building (asking price: a mere $20,000). I loved my expansive apt, and would have 2 small apts. upstairs to lease, which would cover my mortgage. Unfortunately, the bank said no, because they wouldn't allow my primary residence to be in a commercial zone (this building is right on main street).

So....I bought a house 2002. And I have to say that I now love having windows and lots of natural light, a nice yard and garden, and a garage.