What would you do, put 20% or 26% down payment on house?

[jeebuss31]

NO I do not see them as the same.
A- when is loan paid off, what is P&I?
B- when is loan paid off, what is P&I?

then which has less risk? (A does- higher down payment as percentage of loan and listed house value).
The selling issue is based on what another will pay for house, not necessarily what you paid, borrowed or upgraded.

The tax savings will be minimal because the property taxes you pay are deducted from income when calculating income taxes.

You are basically moving money from your left pocket to your right pocket by keeping property taxes low.

Actually, the way I have it set up, A and B are the same P&I. Let's say I have $111,000 to work with.(by doing this, I'll have 8k in savings after closing). Both method will be on 30 years(but I doubt we'll live there that long)

A. $448,244 and put down 25% will give us $337,244 loan. P&I will be $1862

B. Still using the $111,000 to work with, pay builder $26,244 to bring final price to $422,000. Remaining cash is $84756 and will be use for 20% down payment of $422,000. Loan amount will be $337,244 P&I will be $1862.

The goal from B is that we'll save money on monthly taxes. But from what you're stating, method A is better because we'll get more back in income taxes(bc we've paid more?) So by moving money from left to right pocket to keep property tax low, it wouldn't help me in this case?

Again, Thanks for your help...

[jIM_Ohio]

What are the property taxes in both scenarios?

If the money was applied to the SL or the car, would those loans be paid off?

[ScrimpAndSave]

That is so awesome that you saved up that much! GREAT JOB!

How long did it take to save up that amount? I know you said your dad is helping by giving you $20,000...awesomeness.

[snafu]

I wonder how your finance views these financial choices since her income contributes to your plan. With major weight placed on the cost of property tax, why not call your community's assessor office to determine the evaluation or at least the formula used to determine the property tax of your home. In some communities you can access tax assessment for all homes on your street to be certain your assessment is similar for land size and building sf 'footprint.'

Interest rates are dropping which has the potentional to affect your PIT. According to media 'leaks' the new Administration is making plans to ease the burden for homeowners which might change your numbers significantly.

There are other costs associated with home ownership that have not been mentioned like mortgage/home/personal property, insurance, security, ladders/tools, fix it supplies, moving costs, utilitiy deposits/fees over and above useage, pantry, fridge, laundry bathroom products to mention a few

[jeebuss31]

That is so awesome that you saved up that much! GREAT JOB!

How long did it take to save up that amount? I know you said your dad is helping by giving you $20,000...awesomeness.

To save $89,000(not including my dad's gift) it took us around 2-3 years? Of course, we still had to pay for apt rent, auto payments, and student loans. In 2008, we saved and worked aggressive for the down payment. A lot of sacrifices we're made and it wasn't easy! No vacations or big purchases.
Now that we have this much money for the house, it's hard to let the money go!

But I guess the money isn't all going to a waste. The house is suppose to be a investment right?? lol

[jeebuss31]

I wonder how your finance views these financial choices since her income contributes to your plan. With major weight placed on the cost of property tax, why not call your community's assessor office to determine the evaluation or at least the formula used to determine the property tax of your home. In some communities you can access tax assessment for all homes on your street to be certain your assessment is similar for land size and building sf 'footprint.'

Interest rates are dropping which has the potentional to affect your PIT. According to media 'leaks' the new Administration is making plans to ease the burden for homeowners which might change your numbers significantly.

There are other costs associated with home ownership that have not been mentioned like mortgage/home/personal property, insurance, security, ladders/tools, fix it supplies, moving costs, utilitiy deposits/fees over and above useage, pantry, fridge, laundry bathroom products to mention a few

Thanks for the feedback! She doesn't mind contributing the house. We both understand we'll need to work to afford this house. And somehow budget a child in the future.

I will call the assessor tomorrow morning and find out if bringing the purchase price will impact the tax value, since they don't come in the house to access.

[jeebuss31]

What are the property taxes in both scenarios?

If the money was applied to the SL or the car, would those loans be paid off?

Hi Jim..

I think the prop tax will be lower in scenario B. But i'll call and find out for sure tomorrow morning. But hey, since I'm spending the same amount of money for scenario A and B, why not give B a shot? There's nothing to lose right?

My car payment falls off in 12/09. I won't save that much if I pay it off now. I think I'm being charged around $100-$150 in interest for 09?

As for student loans, she has another 7 years of $600.00 a month payment.

[jIM_Ohio]

You have less risk with 26 percent down. Means your property could drop in value 26 percent and you are still in the black. Refinancing is easier, selling will be easier, less risk on a few different levels.

20 percent down is more risk with lower property taxes an higher income taxes. Your overall tax bill compared to scenario above is actually the SAME. You are only moving money from right pocket to left pocket and taking on more risk to do it.

You are not actually achieving the goal you stated (more cash flow) which suggests to me you do not have a concrete plan with your money.

You did not state a goal of "saving the most interest". If you keep changing the evaluation criteria for a decision, it will be tough to make the decision.

Please list all taxes you pay:
Personal Property
State
Property
local
to make a better decision.

[jeebuss31]

You have less risk with 26 percent down. Means your property could drop in value 26 percent and you are still in the black. Refinancing is easier, selling will be easier, less risk on a few different levels.

20 percent down is more risk with lower property taxes an higher income taxes. Your overall tax bill compared to scenario above is actually the SAME. You are only moving money from right pocket to left pocket and taking on more risk to do it.

You are not actually achieving the goal you stated (more cash flow) which suggests to me you do not have a concrete plan with your money.
\.

Since the purchase price is $448,244, essentially I'm putting 25% but some of it will go to builder and rest will go to lender. How is this different showing on the report if I we're to give the lender the full 25% at $448,244? What are benefits of having upgrades enroll into the mortgage?

So your stating whether if we go with A or B, the taxes will remain the same? I beg to differ b/c I've seen homes that are accessed about $10-25k lower than the sale price, thus save money on monthly taxes and could open up cash flow. Again, that's the trend I see here..

[jIM_Ohio]

taxes are the same.

You make $X now. All of X is taxed.

You will make $X after house closes. X gets taxed, Y goes to property taxes. On tax return Y reduces the taxes paid on X (itemized tax return).

If you have lower Y, more of X gets taxed.
If you have higher Y, less of X gets taxed.

I think this is a zero sum decision.
Post all the taxes you pay and what your 2007 AGI was or what your 2008 AGI will be an run the tax returns using both situations.

You are looking at trees without seeing a forest.

There is a property tax tree
There is an income tree
there is a cash flow tree
there is a "total tax" group of trees

If you try to maximize each one you will mis-spend your money.

Which tree is the most important (cash flow, low taxes, low property taxes, or something else).

List the taxes paid to all entities (state, local gov't, property etc) and use this to create a schedule A to see if taxes you owe actually change if property taxes are lower or higher.