Looking4Ward
Full time employment: Posting here.
I'm living in a HCOL area so my son can attend a preferred high school. After four years when he graduates, I'm moving out of this area.
I'm currently leasing a home for $2700 a month. Comparable homes in this area sell for no less than $500K; the appraised tax value on the one I'm renting is $502K.
I've considered buying a home in the area by putting $250K down and taking out a mortgage for the other $250K. Why put down half? Because lenders are only qualifying me for $250K based on dividends and CG distributions on my last two tax returns.
Here's the monthly breakdown if I do that:
$1212 - P&I @ 4.125%
$675 - Property Taxes
$150 - HOA
$100 - Insurance
--------
$2,137 per month to "own" before any maintenance and repairs.
Wow, I save $563 a month, right? But I also lose any investment returns on the $250K that I pulled out, which have averaged 7% over the last 10 years. Nor have I included any potential tax liabilities on the additional capital gains I incur by cashing out that much.
When it comes time to sell, if the home has appreciated 3% a year I might be able to list it for $560K. Subtract 8% selling costs and the remaining mortgage balance and I'm left with $283K. Add the $563 per month I "saved" by owning and I'm up to $310K. Obviously that's best case because it doesn't account for property tax increases and maintenance/repairs.
But wait - had I left that $250K invested and continued to earn 7%, it would have grown to $337K.
Looks like I'm ahead at least $27K by renting for four years. Or am I missing something?
I'm currently leasing a home for $2700 a month. Comparable homes in this area sell for no less than $500K; the appraised tax value on the one I'm renting is $502K.
I've considered buying a home in the area by putting $250K down and taking out a mortgage for the other $250K. Why put down half? Because lenders are only qualifying me for $250K based on dividends and CG distributions on my last two tax returns.
Here's the monthly breakdown if I do that:
$1212 - P&I @ 4.125%
$675 - Property Taxes
$150 - HOA
$100 - Insurance
--------
$2,137 per month to "own" before any maintenance and repairs.
Wow, I save $563 a month, right? But I also lose any investment returns on the $250K that I pulled out, which have averaged 7% over the last 10 years. Nor have I included any potential tax liabilities on the additional capital gains I incur by cashing out that much.
When it comes time to sell, if the home has appreciated 3% a year I might be able to list it for $560K. Subtract 8% selling costs and the remaining mortgage balance and I'm left with $283K. Add the $563 per month I "saved" by owning and I'm up to $310K. Obviously that's best case because it doesn't account for property tax increases and maintenance/repairs.
But wait - had I left that $250K invested and continued to earn 7%, it would have grown to $337K.
Looks like I'm ahead at least $27K by renting for four years. Or am I missing something?
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