BUY NOW! Part II – Supply and Demand $ New Homeowners
by Evan Vanderwey on 17/05/10 at 10:27 am
If you just purchased a home in the last few months and as a result will obtain a housing tax credit through the IRS, then you just paid more for your house than you otherwise would have and, even worse, more for your house than it’s currently worth.
BUT, before you look for ways to get out of your deal before closing, listen up, because you got (or will get) reimbursed for that loss times about two – even more if you’re smart.
Read my previous post on this topic if you haven’t already. Recognize that you and the seller of the home you purchased split the benefit of the stimulus money 50/50 and that your home just went down in value by $4000.
But remember, your check is twice that. So you are already ahead by $4000. Nice work!
Yet, if you use the $8000 credit check wisely you can increase that benefit even further. Here are a few ideas:
~ Once the money comes in, pay down your mortgage by $4000. If you borrowed $100,000 at 5.25% using a 30-year mortgage, then by paying the $4000 down on the loan you shave three years off your loan and save yourself an additional $15,000 in interest over the life of the loan. By doing this you’ve doubled your money again.
OR
~ If you have any credit card debt, pay $4000 toward that debt as a part of a total debt elimination plan (for help with this Google Dave Ramsey Debt Snowball). This will save you at least $100 per month in payments to those accounts and allow you to eliminate your remaining debt faster and/or add $100 to your mortgage. If you added $100 each month to the same mortgage above, you would pay that loan off in 21 years and save yourself more than $33,000 in interest. Now you’ve multiplied your stimulus check by four!
OR
~ If you have no other debt and are disciplined, you could put $4000 into a Growth Mix Roth IRA. If left alone for 30 years (basing this on the last 30 years, including 2008), your $4000 would be worth over $119,000 at about the same time your mortgage is paid off. And because you chose a Roth IRA, you won’t have to pay tax on that investment account. This increases the value of your $4000 gain by over 25 times its original value!
Was I for the stimulus bill?
No way.
Can we sometimes turn the government’s bad ideas into good ones for us? Sure can.
I hope you do.
