In today’s market here in Gainesville many have lost value in their homes. Many would like to trade up to larger homes that would be more suitable for their growing families, but feel stuck because their current home isn’t worth what it used to be. Most feel if they were to sell now they would incur a “loss” that they aren’t willing to take. No one likes the thought of losing. However, if your plan is to purchase a bigger, more expensive home, that seller’s situation is probably much like yours and their loss becomes your gain. In the Gainesville area, most homes have lost about 40% value. Let’s see how the numbers work out…
- Do the Math – Your gain in equity on the purchase can be greater than your loss on the sale of your current home. If you are facing a 40% reduction to a home formerly worth $200,000 that’s an $80,000 reduction. Now, if you purchase a new home that was previously worth $300,000, with that same reduction in value that home is now selling for $180,000, or $120,000 less than before! If you wait to trade up, you may gain your $80,000 back, but end up paying $120,000 more for that larger home. In this example, by trading up now you gain $40,000 in equity later and you may actually end up with a lower payment…
- More for Less – Because our rates are at near historic lows, buyers have a great opportunity. If you purchased at $200,000 with 20% down and have a $160,000 at 6%, your payment (not including taxes and insurance) would be about $954.51. If you purchase a home that used to be worth $300,000 (but is now worth only $180,000) and use one of our low money down options like FHA or VA, you could buy a home with very little out of pocket and end up with a payment of $850 to $1000 depending on the program. That’s $100,000 more home for up to $100 less per month than you are paying now.
- Capital Gains Exclusion – We have it now, but for how much longer? Its no secret that our government is looking to increase revenue to pay for our debt crisis. Until now, tax benefits for housing have been off the table, but many are calling for change. Current tax codes allow married people filing jointly to exclude tax on a sale of a primary residence up to $500,000. Trading into your dream home now, while we still have this exclusion could save a tidy sum in tax dollars at a later date. Tax laws have restrictions and can be complex so always consult with your tax professional for advice specific to your situation.
- What about Investing? Many of the current sales in Gainesville are to investors – pros that know real opportunity when they see it. They realize that buying when everyone else wants to sell is where the greatest opportunity lies in any commodity. This is not for everyone, and not everyone will qualify. However, if you do qualify, you could rent your current home and purchase a new one at a discount, without taking a hit on your sale. Rents in Gainesville are higher than purchase price and increasing. This is not only because of low rates, but the number of people who have lost their home to foreclosure and are now forced to rent. Earning positive cash flow while your tenant is paying down your loan is one of the historical paths to great wealth.
Want to learn more? We know that many are not in a position to move at this time. However, coming to that conclusion based on what you hear on the news or from family and friends may not be the best route. Home prices are at a 10 year low here in Gainesville, there are loan programs that have low down payments, and today’s rates are at historic lows. In short, your dream home will likely never be less costly or more affordable than right now. Give me a call and I will be glad to have a conversation. It won’t cost you anything and you might have everything to gain!
Rob Ziebart, CMPS
Landmark Mortgage Planners
Office (352) 304-5700 or Cell (352) 875-6907