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To buy or not buy....!

To buy or not buy....!

Old Sep 24th 2019, 11:21 pm
  #1  
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Default To buy or not buy....!

Hi,
Haven't been posting for ages as life stateside has got busy. Next month we have our interviews for our green card and we are trying to decide if we want to continue renting, which is very expensive in NJ or buying.
It will be a numbers decision but generally we aren’t fans of renting so if purchasing over a 5/6 year period was a similar cost to renting over the same period them we would rather do that.
I appreciate there are higher maintenance costs, roofs, windows, hvac then the uk, along with high property taxes that are currently all included within our rent, plus property doesn’t appreciate in the same way it may do in parts of the UK. Well certainly if anything here (about 30miles from nyc) things seem to be reducing.in price, so my plan is to monitor the market for the coming months.
What l need advise on is there anything l am missing in doing a 6 year cost comparison on rental versus purchasing.
l believe we can get a tax reduction on the interest on your mortgage and part of your property tax but how does that work and how can you calculate it?
l wanted to work out what capital we would pay of in the first 6 years on a 30 year term but couldn’t find an online calculator (l appreciate it won’t be much!)
Also l appreciate that there would be closing costs including 6% realtor fees and 1% leaving Jersey tax if we sold up at the end of the period, and those l need to factor in.
Thank you in advance for any help or advise you can give.
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Old Sep 27th 2019, 6:25 pm
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Default Re: To buy or not buy....!

For posts like this I actually miss Pulaski....he's good on this.
However - here is a good rent vs buy calculator to help you with this decision.. https://www.nytimes.com/interactive/...alculator.html
Also I once read that you need to budget minimum 1% of property value each year on basic maintenance which based on my 5.5 yrs of US home ownership is about right - and our house was in GREAT shape when we bought it.
Also, I think that the realtors tell you it takes about 7 years on average to break even on a house purchase/sale. Here in TX, most of the costs of selling are borne by the seller so it 's cheap to buy which kind of lulls you into a false sense of comfort.
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Old Sep 27th 2019, 7:15 pm
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Default Re: To buy or not buy....!

We have a bit of a double edge sword here in NJ because as a renter we pay all the realtor fees! So unfair but each rental move works out at about 10k, half in realtor fees and half in other associated costs (movers etc). This along with our rental driving me mad, is making me want to buy but not at all costs.
Thank you for the link!!
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Old Oct 6th 2019, 1:28 am
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Default Re: To buy or not buy....!

Originally Posted by Ecto17 View Post
...
l wanted to work out what capital we would pay of in the first 6 years on a 30 year term but couldn’t find an online calculator (l appreciate it won’t be much!)
...
Do you have excel? and if not, do you have a google account because 'sheets' will do it for you too.

All you need to know, assuming you can construct a basic spreadsheet, is the formula '=pmt ( rate, nper, -pv)'
You should create a bunch of 'entry cells' for Amount borrowed, rate, periods, then point the elements of the formula at them (rate = annual rate/12; nper = Years of mortgage * 12, pv is the amount borrowed). This will give you the monthly payment for the amount borrowed. Then, simply construct a range of cells for each month for the next 5 years. This allows you to sum the payments, interest, etc. With such a 'grid', you can deal with variable rate loans, figure out interest (which may be deductible), principle, etc.

Here's a screen-shot of such a spreadsheet I created ... oh my, so long ago! ... 1994 when I was looking at refinancing a loan that had a balance of $224,315. The 'payment' cell at the top uses the formula above. The rest are basic 'a-b' type cells, with the 'interest' cell being 'remaining balance' from previous row * rate. 'total payment' is the initial payment calculated, until the rate change occurs, at which point you recalculate the payment just for that month. Doing this allows you to start the first year mid-year and still end up with year-end values. It's a bit of effort to set up, but once you have it, you can re-use it a thousand times. I guess I hard-coded this for 30 years rather than making it a variable - which was short-sighted of me . You can copy/paste this layout for the full 30 years if you use all the correct relative references. I've financed and refinanced over 10 times in my life and this has served me very well!


Last edited by Steerpike; Oct 6th 2019 at 1:32 am.
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Old Oct 7th 2019, 3:02 pm
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Default Re: To buy or not buy....!

Thank you!!! That is really helpful and exactly what l need!!
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Old Oct 9th 2019, 6:16 am
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Default Re: To buy or not buy....!

Don't assume appreciation is always less than the UK. Prices in the UK have also been falling part few months in some parts. Also some parts is the US appreciate faster than the US. Also maintenance costs vary tremendously across the US depending on the building materials and the climate. Also check out property taxes. These can vary a lot depending on the county.
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Old Oct 9th 2019, 1:59 pm
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Default Re: To buy or not buy....!

Thank you. I really appreciate all input at the moment. Yes l heard that maintenance was high which is one reason l think we will try and avoid a fixer upper which would have been our preference. I think in our township every job you want to do has to have a permit which of course you pay for and then slows you down. Additionally if we do go ahead and buy l think we need to factor that into our monthly outgoings.
Taxes in NJ are insane. We live a decent size but very dated house, so nothing crazy by any means and the annual taxes are about 18k on it!! Obviously we don’t pay it directly as it is factored into the rent. How anyone affords to retire here is beyond me!
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Old Oct 9th 2019, 2:05 pm
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Default Re: To buy or not buy....!

Originally Posted by Ecto17 View Post
Thank you. I really appreciate all input at the moment. Yes l heard that maintenance was high which is one reason l think we will try and avoid a fixer upper which would have been our preference. I think in our township every job you want to do has to have a permit which of course you pay for and then slows you down. Additionally if we do go ahead and buy l think we need to factor that into our monthly outgoings.
Taxes in NJ are insane. We live a decent size but very dated house, so nothing crazy by any means and the annual taxes are about 18k on it!! Obviously we don’t pay it directly as it is factored into the rent. How anyone affords to retire here is beyond me!
It may not apply to NJ, but in CA, property taxes are somewhat limited in terms of how much they can appreciate, once you are an owner. This was done specifically to protect retirees. To read more (very controversial, lots of information online), look for 'California Proposition 13'.
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Old Oct 9th 2019, 2:14 pm
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Default Re: To buy or not buy....!

Now you say that, l think that is true in Florida as well. I will look into that, thank you!
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Old Oct 12th 2019, 1:45 pm
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Default Re: To buy or not buy....!

I don’t know about NJ, but in NY, where we live, we were (pleasantly) surprised to find that there’s massive tax relief for retired folk. First, we haven’t paid a penny of state income tax since retiring. Then, we pay property taxes as usual, but a few months later the state sends us a check, reimbursing us for about 50% of the property tax bill.

That income tax break only works because we have a relatively modest income. If we were Donal Trump or similar, no doubt we’d pay mega state taxes. Oh wait, maybe not ....
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Old Oct 14th 2019, 1:30 pm
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Default Re: To buy or not buy....!

That must have been a seriously nice surprise!!!

A little update date on our position, l have met with our realtor and talked through options and have been in contact with a financial advisor. What we have established so far is that your ability to borrow and at what rate, is linked to your credit rating and affordability opposed to the British system of what you earn. It means we have to have our credit run to establish what we can borrow & at what interest rate and once we have done that, we will will get a true sense of what we should do.
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Old Oct 14th 2019, 4:52 pm
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Default Re: To buy or not buy....!

Originally Posted by Ecto17 View Post
That must have been a seriously nice surprise!!!

A little update date on our position, l have met with our realtor and talked through options and have been in contact with a financial advisor. What we have established so far is that your ability to borrow and at what rate, is linked to your credit rating and affordability opposed to the British system of what you earn. It means we have to have our credit run to establish what we can borrow & at what interest rate and once we have done that, we will will get a true sense of what we should do.
Kind of. Obviously your creditworthiness play a large part in your eligibility, but from my experience, your earnings play an even more important factor. Generally speaking your creditworthiness will determine your interest rate, but your earnings will determine your maximum borrowing and therefore purchase price. Also keep in mind you absolutely can and SHOULD shop around for your mortgage. You'll take a hit on your credit score for the first "hard pull" but all the others that follow (for mortgage enquiries) within the next 30 days will not impact your score and will be treated as one, so absolutely shop around as much as you can.
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