I thought 30% down better to reduce interest pay. But my agent says to put 20% because I could get tax deduction for home interest payment. which one is better to reduce interest pay or to get tax benefit?
2007-03-23 15:58:44 · 9 answers · asked by ek 1 in Business & Finance ➔ Investing
Follow your agents advice
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2007-03-23 16:07:15 · answer #1 · answered by Carlene W 5 · 0⤊ 0⤋
Most true investors try to put as little down as possible. If you will be living in the house is one thing, but if you plan to flip the house within 6 months it is another. Investors go strictly by the numbers and if the numbers don't work they don't do the deal. To invest safely you need to have an idea of what you will be able to resell the house for and when. If you are living in the house, you risk the investor's worst demon which is you will become emotionally attached to the idea of the house and may make renovations that will out price your prospective future buyers. Owning a house is not always a way to turn a profit unless you buy it at the right price. Most investment courses in the country recommend buying a house 30% below market value. It would not matter how much down payment you make if you buy a house like that. In that way you have covered yourself for a market downturn and for the amount of time it may take to sell the house in a slow market. Tax write-offs don't count in an investment as far as I am concerned. It is as simple as what price can I buy it at, what price can I resell it at, what is my profit after all payments, taxes, repairs, commissions, etc. Emotionally detach yourself and you will do better. Remember when you go through a realtor you are paying at least a 3 % commission whether you are the buyer or seller since the commission is built into the sales price by the seller. That is 3% on each end that you will lose on your investment. You sounded a little starry-eyed and like a novice so sorry but you must figure costs as close as you can if you wish to turn a profit. Investment is about profit.
2007-03-23 23:13:15 · answer #2 · answered by Anonymous · 0⤊ 0⤋
read this - behind the emotional appeal of paying off the mortgage is an economic fallacy that goes like this.that mortgage has so much interest built into it that you wind up paying for the house 2 times over.the fallacy has to do with the time value of money.a dollar today is not all the same as a dollar in 25 years.adding up 2007 interest costs with 2018 interest costs is not just misleading its nonsence.a 7% morgage has an aftertax cost in the neighborhood of 4%.can you invest at a better yield?
2007-03-24 10:47:11 · answer #3 · answered by derrik 2 · 0⤊ 0⤋
To me reducing long term interest would be much better than a tax deduction.
2007-03-23 23:05:26 · answer #4 · answered by ncgirl 6 · 0⤊ 1⤋
If you are going to live in it go for 20%
If you are going to rent it put down 30%
this will simplify financing greatly and there is a much greater tax advantage for owner occupied property over rental property
2007-03-24 01:12:38 · answer #5 · answered by hogie0101 4 · 0⤊ 0⤋
I would say reduce interest; the interest savings will more than compensate for the tax savings.
2007-03-23 23:06:52 · answer #6 · answered by supertop 7 · 0⤊ 0⤋
if you've got the money do the 30%, you'll be happy you did in the end, because the interest will be much less.
2007-03-25 00:23:44 · answer #7 · answered by Jason H 2 · 0⤊ 0⤋
Sounds like voodoo economics
2007-03-23 23:06:59 · answer #8 · answered by Anonymous · 0⤊ 1⤋
get tax benefit
2007-03-23 23:02:17 · answer #9 · answered by preethi r 1 · 1⤊ 0⤋