Case Studies

The tax deduction Explained
Mark and Jen purchased a home for $350,000, with 4800 in property tax.  They put 20 % down and have a monthly payment $2182.00.  Of this monthly payment $1800 is interest and real estate taxes, which is tax deductible. 

Mark and Jenn make a combined income of 100,000. Their employers withhold taxes based on their salary of 100K.  When tax time comes they are able to claim the mortgage interest and real-estate taxes paid approx. $21,600, this effectively reduces their gross income from 100K to $78,400.  When they compare the taxes withheld on their gross of $100,000 to their adjusted gross – “they overpaid their taxes” by approx $5400.  Mark and Jenn get a refund of 5,400 – just for owning a home!

Let Uncle Sam Help!

Buy more with the tax deduction

Tom and Donna
Tom and Donna could only afford to pay $1500 month.  However they could not find a home in this price range.  They needed at least $40,000 to $50,000 more to buy something really nice.  We utilized the tax deduction to help them buy more of a house. 

Here is how:
Instead of “waiting” until tax time to get their refund, Tom and Donna did the following.  Since we knew they would easily get a refund of $4800 – they went to their employer and requested to increase “dependents” to allow them to take home $400 more per month.  Using this $400 we determined that approximately $100 would go towards the additional real estate taxes and $300 for additional mortgage payment. This $300 allowed Tom and Donna to increase their purchase power by $48,700.**.

The Seller Can help you buy a home!

wanted to buy a condo, she had $6,000 total. For a down payment and closing costs.  Not enough to cover both items.

We found a condo listed for 205,000, Kristen was approved for an FHA loan with a 3% down payment, using her $6,000, this covered the 3% of the asking price needed. Now we needed the $5,000 for closing costs and prepaid items, we negotiated the asking price of the condo $200,000 with the seller to “contribute” $5,000 for the buyers closing costs, In this case the seller would be effectively netting $195,000 before closing costs.

Kristen paid $200,000 for the condo, she put $6,000 down making her mortgage amount $194,000.  At the closing the seller gave Kristen a credit for $5,000 which covered the closing costs.  Kristen has her condo she is happy and the seller is happy, a win win for all...

Mary was renting a condo for 1200 per month; she basically was throwing $14,400 out of the window.  She wanted to buy a condo she wanted to pay not much more than rent,  she thought waiting a year to save more money was the way to go.  When we asked the question “how much can you save” her reply was minimal and not enough to make a dent.  We structured a deal for Mary where she

* Prequalified for first time buyer program or FHA program. 5% down

* purchase a condo for 200K

* 3% down payment = 6000 plus $5000 closing costs

* Total monthly payment = approx $1700 (including mortgage, taxes, maintenance fee)

*Using the tax deduction of $16,800, Mary was able to get a refund of approximately $4,200 per year.  Spread this $4,200 over 12 months = $350 per month.  
  Mary’s effective monthly payment is $1,350 - so for $150 more per month, Mary owns her own home.

The Rebalancing Act!

Joanne and TedJoanne and Ted needed to upgrade their home, their 3-bedroom, 1-bath was just too small for their growing family.  They “had” to sell their home for $269,000 and they wanted to buy a 4-bedroom 2.5 baths for approximately $470,000.  They became stuck on the number of “Had to get”  $269,000.  After many months, several other realtors and rejections, we proposed a plan to reduce the price by $40,000.  Their house sold and the homes that they liked previously for $470,000, we were now in a position to negotiate.  We zeroed in on a home suitable and negotiated a sale for $430,000 which was $40,000 below the asking price of what they thought they had to pay.  So by reducing their home we made this up on the “buying" end.     

**always consult with your tax advisor regarding your individual tax circumstance. 

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