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WaitingToExhale
Participant[quote=edna_mode]… So about $600/mo carrying cost per $100,000 house. Haven’t been too far off yet.[/quote]
I’m happy you posted this, since it pretty closely matches my calculations of what my post tax-break carrying cost would be. As a first time house buyer, I’m nervous about using the online calculators, and I always assume everything will always be somewhat more costly or less beneficial than they suggest.
Thanks for the feedback.
Participant[quote=edna_mode]… So about $600/mo carrying cost per $100,000 house. Haven’t been too far off yet.[/quote]
I’m happy you posted this, since it pretty closely matches my calculations of what my post tax-break carrying cost would be. As a first time house buyer, I’m nervous about using the online calculators, and I always assume everything will always be somewhat more costly or less beneficial than they suggest.
Thanks for the feedback.
Participant[quote=SK in CV]Yes, you are missing something.
The calculation DOES factor in the tax deduction.
If the tax deduction was not factored in, the limit would be lower than 28%. It factors in everything. Cost of food, clothing, transportation, entertainment, and yes, taxes too. It factors in everything that isn’t principle on the loan, interest on the loan, property taxes and insurance.
It’s not a precise calculation. It is simply a percentage that historically works.[/quote]
You’re absolutely right that it isn’t a precise calculation; that makes total sense. I was just considering that since the deduction specifically benefits higher tax brackets/bigger mortgages, and does NOT benefit low brackets/smaller mortgages, it results in a significant difference that is not captured in the typical affordability calculators.
From a quantitative viewpoint of what percent of gross income the mortgage holder has available on a yearly basis, the deduction should result in a significantly greater than 28% proportion being available to those folks. From your (and others’) comments, it seems more an empirically derived metric of probability of default, which is perfectly reasonable.
Participant[quote=SK in CV]Yes, you are missing something.
The calculation DOES factor in the tax deduction.
If the tax deduction was not factored in, the limit would be lower than 28%. It factors in everything. Cost of food, clothing, transportation, entertainment, and yes, taxes too. It factors in everything that isn’t principle on the loan, interest on the loan, property taxes and insurance.
It’s not a precise calculation. It is simply a percentage that historically works.[/quote]
You’re absolutely right that it isn’t a precise calculation; that makes total sense. I was just considering that since the deduction specifically benefits higher tax brackets/bigger mortgages, and does NOT benefit low brackets/smaller mortgages, it results in a significant difference that is not captured in the typical affordability calculators.
From a quantitative viewpoint of what percent of gross income the mortgage holder has available on a yearly basis, the deduction should result in a significantly greater than 28% proportion being available to those folks. From your (and others’) comments, it seems more an empirically derived metric of probability of default, which is perfectly reasonable.
Participant[quote=SK in CV]Yes, you are missing something.
The calculation DOES factor in the tax deduction.
If the tax deduction was not factored in, the limit would be lower than 28%. It factors in everything. Cost of food, clothing, transportation, entertainment, and yes, taxes too. It factors in everything that isn’t principle on the loan, interest on the loan, property taxes and insurance.
It’s not a precise calculation. It is simply a percentage that historically works.[/quote]
You’re absolutely right that it isn’t a precise calculation; that makes total sense. I was just considering that since the deduction specifically benefits higher tax brackets/bigger mortgages, and does NOT benefit low brackets/smaller mortgages, it results in a significant difference that is not captured in the typical affordability calculators.
From a quantitative viewpoint of what percent of gross income the mortgage holder has available on a yearly basis, the deduction should result in a significantly greater than 28% proportion being available to those folks. From your (and others’) comments, it seems more an empirically derived metric of probability of default, which is perfectly reasonable.
Participant[quote=SK in CV]Yes, you are missing something.
The calculation DOES factor in the tax deduction.
If the tax deduction was not factored in, the limit would be lower than 28%. It factors in everything. Cost of food, clothing, transportation, entertainment, and yes, taxes too. It factors in everything that isn’t principle on the loan, interest on the loan, property taxes and insurance.
It’s not a precise calculation. It is simply a percentage that historically works.[/quote]
You’re absolutely right that it isn’t a precise calculation; that makes total sense. I was just considering that since the deduction specifically benefits higher tax brackets/bigger mortgages, and does NOT benefit low brackets/smaller mortgages, it results in a significant difference that is not captured in the typical affordability calculators.
From a quantitative viewpoint of what percent of gross income the mortgage holder has available on a yearly basis, the deduction should result in a significantly greater than 28% proportion being available to those folks. From your (and others’) comments, it seems more an empirically derived metric of probability of default, which is perfectly reasonable.
Participant[quote=SK in CV]Yes, you are missing something.
The calculation DOES factor in the tax deduction.
If the tax deduction was not factored in, the limit would be lower than 28%. It factors in everything. Cost of food, clothing, transportation, entertainment, and yes, taxes too. It factors in everything that isn’t principle on the loan, interest on the loan, property taxes and insurance.
It’s not a precise calculation. It is simply a percentage that historically works.[/quote]
You’re absolutely right that it isn’t a precise calculation; that makes total sense. I was just considering that since the deduction specifically benefits higher tax brackets/bigger mortgages, and does NOT benefit low brackets/smaller mortgages, it results in a significant difference that is not captured in the typical affordability calculators.
From a quantitative viewpoint of what percent of gross income the mortgage holder has available on a yearly basis, the deduction should result in a significantly greater than 28% proportion being available to those folks. From your (and others’) comments, it seems more an empirically derived metric of probability of default, which is perfectly reasonable.
Participant[quote=temeculaguy]One of the reasons it doesn’t factor it in is because the qualification percentage is based on GROSS income. The formula has been used for a long time and is time tested for repayment success. …
…. Try and stay under that number by either waiting for your income to rise, the price of the house to fall or look for a cheaper house.[/quote]
TMG, you are exactly right, and this has been our plan. We have no problem qualifying, but as we all know it was “qualifying” but not truly being able to afford that got the world into the mess it is currently in. I’m just incessantly running numbers.
Fortunately, my wife puts up with it all.
Participant[quote=temeculaguy]One of the reasons it doesn’t factor it in is because the qualification percentage is based on GROSS income. The formula has been used for a long time and is time tested for repayment success. …
…. Try and stay under that number by either waiting for your income to rise, the price of the house to fall or look for a cheaper house.[/quote]
TMG, you are exactly right, and this has been our plan. We have no problem qualifying, but as we all know it was “qualifying” but not truly being able to afford that got the world into the mess it is currently in. I’m just incessantly running numbers.
Fortunately, my wife puts up with it all.
Participant[quote=temeculaguy]One of the reasons it doesn’t factor it in is because the qualification percentage is based on GROSS income. The formula has been used for a long time and is time tested for repayment success. …
…. Try and stay under that number by either waiting for your income to rise, the price of the house to fall or look for a cheaper house.[/quote]
TMG, you are exactly right, and this has been our plan. We have no problem qualifying, but as we all know it was “qualifying” but not truly being able to afford that got the world into the mess it is currently in. I’m just incessantly running numbers.
Fortunately, my wife puts up with it all.
Participant[quote=temeculaguy]One of the reasons it doesn’t factor it in is because the qualification percentage is based on GROSS income. The formula has been used for a long time and is time tested for repayment success. …
…. Try and stay under that number by either waiting for your income to rise, the price of the house to fall or look for a cheaper house.[/quote]
TMG, you are exactly right, and this has been our plan. We have no problem qualifying, but as we all know it was “qualifying” but not truly being able to afford that got the world into the mess it is currently in. I’m just incessantly running numbers.
Fortunately, my wife puts up with it all.
Participant[quote=temeculaguy]One of the reasons it doesn’t factor it in is because the qualification percentage is based on GROSS income. The formula has been used for a long time and is time tested for repayment success. …
…. Try and stay under that number by either waiting for your income to rise, the price of the house to fall or look for a cheaper house.[/quote]
TMG, you are exactly right, and this has been our plan. We have no problem qualifying, but as we all know it was “qualifying” but not truly being able to afford that got the world into the mess it is currently in. I’m just incessantly running numbers.
Fortunately, my wife puts up with it all.
Participant[quote=scaredycat]i am stunned at the number of people who do not know that there is a satndard deduction. educated people. as if there would be no deduction from your taxes if you did not itemize. the standard deduction is going to be greater than the itemizations ona lot of cheap houses! and when you run the nubers, add property tax — there is no tax savings![/quote]
Absolutely, but the houses we have been looking at are in the range where the property tax and interest are well above the standard deduction. In most parts of the country (the non-crazy parts, IMO), the mortgage deduction is a wash relative to the standard deduction. That’s not the case with many houses in San Diego.
Participant[quote=scaredycat]i am stunned at the number of people who do not know that there is a satndard deduction. educated people. as if there would be no deduction from your taxes if you did not itemize. the standard deduction is going to be greater than the itemizations ona lot of cheap houses! and when you run the nubers, add property tax — there is no tax savings![/quote]
Absolutely, but the houses we have been looking at are in the range where the property tax and interest are well above the standard deduction. In most parts of the country (the non-crazy parts, IMO), the mortgage deduction is a wash relative to the standard deduction. That’s not the case with many houses in San Diego.
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