A couple of years ago, I tried to get into the housing marketing. I did all of the home ownership classes and received 2 pre-approvals of about $150,000 each. I was trying to get in the house market because of the low home values. From a financial standpoint, I would have been about the same cost to own as it was to rent.
As I went through the process, I became aggravated. I ran into so much red tape and income restrictions for the down payment assistance programs and housing programs. I was paying money out for home inspections and application fees for houses I could not get. The realtor I worked with did her best to keep my posted on new houses and regulation changes. I decided to wait 6 months and try again.
During my 6-month "time-out", I realized that owning home is not as high on my bucket list as I thought. As time passed, I just simply gave up for several reasons. One, I am not handy. I don't anything about replacing or fixing pipes, gutters, etc. The second reason is I having a very busy life right now. I am hardly in my apartment. The same would be true for my house. Another reason: student loans. If I did not get my master's degree, I could most definitely afford a home that is reasonably priced. Also, the job market has been in the toilet for about the last 2 years. It would not have been a good move to buy house when my employment had a high risk of changing for the worst. And lastly, I would not have had any substantial financial benefits.
There are two reasons why people by a house: for the space and the financial benefits. I didn’t really need the space. But who passes up a financial benefit? Not this gal! So I finally sat down and did some math of how much homeownership would have cost me and how it would have impacted my tax situation.
My monthly housing payment would have been $230 more, along with an increase in utility payments of an additional $140 each month. My grand total of expenses as a new homeowner would have been roughly $1,150 each month, which represents a $510 (44%) increase. I included $250 extra each month for updates and repairs. I would have been able to deduct my mortgage interest and my mortgage insurance if I itemized. To create a tax savings, my state income taxes, mortgage interest, and insurance would have to equal or than $5,700 annually. Based on my estimates, I would have had $12,090 in itemized deductions. In the end, I would have saved $2,327 in federal taxes only. My state tax return would have been exactly the same. The tax benefit would have been only $193 each month.
I’d rather keep my additional $510 to fund my Roth IRA, save for a vacation, or pay off debt. I am not homeowner, and proud of it.
"Putting My Money Where My Mouth Is" is a journal about real life experiences and concerns of Jéneen R. Perkins. The purpose of the blog is to exhibit the real life challenges and answer the tough questions posed by the concepts of business, entrepreneurship and money.