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TWO YEARS HOME OWNER DUES PAID BY SELLER
This is a limited time offer
Golden Eagle - Large gated lots for your custom home
Golden Eagle HOA DUes ARE only $40 per month
The below explains why an extra $200 per month in HOA dues is equal to a payment on a $125,000 to $145,500 mortgage. In other words, you are buying a lot for $125,000 to $145,500 less than you think!
Current 30 year no point interest rates are about 2.75%. Mortgage Interest paid is tax-deductible. If a person is in the 30% tax bracket, then the net interest rate after tax deductions reduces to 1.925%.
At 1.925% the interest only payment on $125,000 is $200.61.
If a person is in the 40% tax bracket (federal & state), the effective interest rate drops to 1.65%.
At 1.65% the interest only payment on $145,500 is $200.34.
For each additional $200 in HOA dues or Mello Roos taxes or other fees a person pays in another subdivision, a buyer could have spent $125,000 to $145,500 more for a house in the Golden Eagle subdivision if they are in the 30% to 40% tax bracket, yet have the same effective payment.
Other subdivisions have significantly higher taxes and HOA dues.
government incentives
Currently we are experiencing historically low interest rates. The current 2.75% interest rate is almost 1/3 of the "normal" 7.5% interest rate. Low interest rates make this one of the best times in history to buy a house. People can now buy a nicer house than they think they can afford. Let me explain:
This is an unprecedented time in history because a 2.75% loan on an $856,000 house will have a lower payment than a $500,000 house had in 2004. This assumes a 20% down payment to prevent paying mortgage insurance.
Let's do the math to discover that buying an $856,000 house is cheaper than renting a $400,000 house.
If a person puts 20% down, he has a $684,800 loan on a $856,000 home. The monthly principal and interest payment on $684,000 with a 2.75% 30 year loan is $2795.64. However, $1226.65 of the monthly payment is going towards the principal. This is like putting $1226.65 into a retirement account the first month. Each month the amount of the payment which goes towards principal increases. In other words, it is like putting more money in a retirement account each month.
What a person effectively pays after tax deductions for housing.
$1569.36 of the $2795.64 total payment is tax deductible interest. If a person's income places him in the 40% tax bracket, then his effective monthly payment after tax deductions is $941.62 for interest. Adding about $500/month for property taxes and about $100 for insurance, the effective monthly payment is $1541.62 for the first month. Since the amount of payment going towards interest decreases each month, then the effective monthly payment of $1541.62 would decrease every month.
The monthly rent would probably be over $2000/mo. to rent a $400,000 home and over $4000/mo. to rent an extremely beautiful $856,000 house in a gated community.
In this example, for the first month, it is $458 cheaper per month to buy an $856,000 house than to rent a $400,000 house. It would be $2,458 per month cheaper to buy an $856,000 house than to rent an $856,000 house that rents for $4000/month.
Future rental payments for the $400,000 home would increase the $2000/mo. initial rental price. However, when a person buys a house, the amount of interest paid on a loan goes down each month. Therefore, when buying a house the $1541.62 effective monthly payment decreases each month.
Due to current low interest rates, upscale housing is an excellent long term investment for those with secure employment. A house payment on an expensive house is like putting large sums of money into a retirement account. It is safer than investing in the stock market, which is easily manipulated by hedge funds. And, there is instant enjoyment of living in the investment.