The Kestner Team

ARE YOU A FIRST TIME HOME BUYER? You CAN Buy a Home and NOW is the time.

On April 9, 2008, The Federal Government issued a TAX CREDIT for first time home buyers who purchase a principal residence between April 9, 2008 and July 1, 2009.

The following are excerpts from an article in RISMEDIA on November 10, 2008 written By David Fialk:

If you are single with an income no more than $75,000 a year – YOU QUALIFY.

If you are married with a total income no more than $150,000 – YOU QUALIFY.

The available tax credit is 10% of the purchase price of the home up to a maximum credit of $7,500.

It is a tax credit and not a tax deduction. A tax credit is a reduction in income taxes owed! In other words, when you file your income taxes for the year the home was purchased (2008 or 2009), you may be able to subtract $7,500 from the amount of federal income tax liability, which will either increase your tax refund or reduce the amount of tax you owe.

However, this tax credit is not free. It has to be paid back. Repayment begins two years after the credit is claimed, and must be repaid within 15 years. That’s $500 per year. That’s an interest-free loan for 15 years.

This credit allows you, as a first time home buyer, with more ability to furnish that new home, spend money on painting, redecorating, curtains, buy a lawn mower, ladder, garden tools, etc. Most home buyers would have to purchase these items with a credit card paying up to 20% interest rates. This tax credit allows you to avoid that expense credit card debt – you only pay it back $500 a year for 15 years – interest free.

What if you don’t need the $7,500??? You can apply it to the principal balance on your mortgagee which in turn will decrease your interest payments! The outstanding mortgage balance is reduced by $7,500 and each future mortgage payment results in savings in mortgage interest and increased principal mortgage reduction. With each monthly mortgage payment more money goes to reducing the mortgage balance and less is applied to interest. Together these savings will exceed the $500 cost of repayment of the tax credit. The benefit over the term of the mortgage in interest savings and mortgage reduction will be quite surprising.

What if you sell your home prior to 15 years? There is a provision in the tax code that requires repayment of the balance of the tax credit owed in the event of a sale of the home prior to full repayment. However, special provisions do provide for circumstances where the balance owed is greater than the gain in value or when there is a loss in value. If the gain on the sale is less than the amount owed, part of the balance owed will be forgiven. If there was no gain, or even a loss, then the remaining balance would not need to be repaid.

AGAIN, NOW IS THE TIME TO BUY A HOME. There are a lot of homes to choose from, prices are low, interest rates are low, and you can get a tax credit!!!

Contact Nina Kestner at 615-289-1340 or Kevin Lennon at 615-473-1073 to help you find that perfect home!