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January 30, 2007

Why home ownership kicks ass ()

by fluffy at 12:13 AM
I just did my taxes. $1800 refund.

(Without the deductions from my mortgage I'd have had to pay $360ish.)

(Of course without the mortgage, $360ish wouldn't have been a big deal either since I'd have a heck of a lot more money.)

(Of course that counter-argument ignores equity, though I'm not sure if my monthly equity accrual is enough to counter the difference in my total monthly payment vs. my previous rent in a bigger, fancier apartment which was downtown, but oh well.)

(Actually I just worked it out and the interest portion of my payment is only barely higher than the rent I was paying previously. Woo.)

Comments

#8245 01/30/2007 08:43 am ownership
The other big advantage of home ownership is that it is possible for the value to increase dramatically without you doing anything at all. Unfortunately, you can only really count on it in the long term. (Especially these days.)
#8246 01/30/2007 08:52 am
Yeah, though it's not like I'm planning on moving soon anyway. I think I'd like to eventually move downtown-ish again, but there's no way I can afford anything decent there. Alternatively I think I'd like a townhome in the Beacon Hill area, which would still have easy bus access to work (while also justifying having a car again, apropos to the previous entry). Though that's still a bit of a pipe dream unless I were to suddenly either get a huge raise or a spouse.
#8248 01/31/2007 10:34 pm
(oh also the interest portion of the payment is only about the same as my old rent before accounting for the tax deduction. so it means that currently my "rent" is actually about 28% less. I just only see that difference annually, and lose out on interest from the money I'd theoretically have in savings but in practice I'd just spend it all on toys anyway so the equity works better than a savings account for me.)
#8253 02/02/2007 05:58 pm
I've always felt that rent vs. buy arithmetic was more nuanced than most people considered. For example, you probably had to give up the standard deduction to take the mortgage interest deduction, so in some sense you don't get to fully deduct your mortgage interest. Also, depending on where you live, property taxes can be substantial (monthly taxes ~ 33% of a mortgage payment for an 80% loan around here), and you may also pay more for insurance as a home owner than you do as a renter. Of course you may get more/nicer space as an owner, and obviously the property can appreciate (the most unpredictable and most significant factor in this analysis, I suspect).

fluffy:
(oh also the interest portion of the payment is only about the same as my old rent before accounting for the tax deduction. so it means that currently my "rent" is actually about 28% less. I just only see that difference annually, and lose out on interest from the money I'd theoretically have in savings but in practice I'd just spend it all on toys anyway so the equity works better than a savings account for me.)
#8254 02/02/2007 06:45 pm
My standard deduction didn't come even close to my interest deduction. The standard deduction is supposed to just be an average "I didn't bother to itemize so here's how much the government assumes I should get" thing. Also mortgage taxes are dedutable etc etc blah.

Also, since I'm in a condo, the building itself is insured by the HOA (granted I forgot to include my HOA fees but they're pretty low especially for Seattle) so my own homeowner insurance isn't much higher than what rental insurance normally would be (since it doesn't have to cover much more than what a rental policy would cover).

Basically your argument boils down to "Yes you come out ahead but it's not as far ahead as it might sound," except that the amount ahead I calculated was including those factors (i.e. $1800 refund instead of $360 payment, with monthly expenses more or less the same either way). So I can safely say that, minus the HOA fees and slightly higher insurance, I come out exactly $2160 ahead.