First Time Homebuyers Tax Credit

[Nick Gromicko]

Unless you are paying cash, you either rent your home or you rent the money to buy your home. I can show you how paying cash is really throwing money down the drain, but for now, let's just look at renting vs. buying. Let's say that there are two homes on a street; one for rent and one for sale. And let's say that you are indifferent about them. Both homes are nice. In either case, you will have to spend money to live in one. If you rent, all of your rent money is spent (down the drain) on living there. If you buy, some of your money goes toward paying down the principle and builds equity, the rest is spent (down the drain). That money includes your closing costs to buy, almost all of your mortgage at first which is mostly interest, all your taxes, all your insurance, all your repairs, and all your closing costs to sell. All of that money, just like rent, might as well have been flushed down the toilet. Now buying seems like it works if you stay in the home a long time and home prices increase in value. I hear people say "My house went up double since I bought it 15 years ago." This brings us to the question... had you rented instead, and invested all the money you wasted on closing costs and interest and insurance and taxes and repairs... would you have a chunk of change that is more or less than the increase in your homes value or not? Well there is a simple formula to figure it out. Here it is: If the cost of renting per month is less than 1/100th the cost of the selling price of the home... rent. If the cost of renting per month is more than 1/100th the selling price of the home... buy.

Now this formula doesn't take into consideration those who find pride in home ownership or those who want to own a home because they like working on it or painting their living room purple or whatever. If you are one of those people, then you should throw more money down the drain and buy a home. Everyone is different and I'm not saying that your thinking isn't right for you. It's just not right for me. I sleep like a baby knowing that my landlord subsidizes my living expenses, that my would-be closing cost money, interest portion of my mortgage payment, insurance, taxes, and repairs... are all in my pocket, not some real estate agent, bank, insurance company, or contractor's. I sleep like a baby when I think the septic system might go or termites are hungry or the wind is blowing or the neighbor is an ****hole or the local economy goes sour. Again, I'm not saying my thinking is right for you. All I know is that when I came home one day and told my two teenage boys to give all their crap away in the front lawn and pack the truck because we're moving to the top of the Rockie Mountains, they had their stuff in the front yard in 30 minutes.