Magic of Principle Pay Down FHA Loans California is a post from: FHA,VA and Conventional Home Loans in all 50 States
Two of the main benefits when you get FHA loan to buy a home vs. renting are that when you buy you get to deduct the FHA loan interest + property taxes and pay less income tax, and when you have a fully amortized mortgage, every month you pay down part of the the principle of the loan.
Let’s take a $350,000 FHA mortgage with a 4.75% 30 year fixed loan on your home purchase for example. In the first year you would pay down $5,522.33 of principle of the FHA mortgage loan balance. By year 5 you would have paid down $30,426.01 in mortgage principle. By year 10 you’ll have paid down $68,990.39 of the mortgage balance. As long as your housing payment (minus the tax break for buying) is close to what rent is for a similar property, this is a really big advantage over renting because you are gaining equity in the property every month vs. when you rent the money just goes up in smoke. Additionally, if you were to add a little extra to your mortgage payment every month, you could pay your FHA mortgage in California off dramatically faster. So you are working towards one day having no mortgage on your property and an extremely low payment that is just property taxes and insurance. This helps you retire in style with a very low overhead.
Additionally, a $350,000 FHA mortgage would result in $16,625 a year in mortgage interest and $4,000 in property taxes that could be written off your income taxes. A rough estimate is this would save you $7,218 in income taxes you would pay if you were renting that you now don’t have to pay because you are an owner. $7,218 works out to be an extra $601/mo you have when you buy vs. rent. You can also adjust your tax withholdings on your W-4 with your HR Dept once you buy because you have this deduction and have them withhold less tax from your paycheck.
So the combination of the loan principle pay down + the mortgage interest and property tax write-off you get when you buy, give you a big advantage over renting if rent is close to your housing payment.
Here are some great benefits of FHA home loan California:
- FHA loan credit score does not have to be perfect to get the very best FHA loan interest rates
- FHA loan interest rates have dropped again to be close to historical lows
- Maximum FHA loan in many California cities and counties like Los Angeles, San Diego, San Jose, San Francisco, and Orange County go all the way up to $729,750.
- FHA loan down payment is only 3.5% and this can come from a gift from a relative
- FHA loan PMI (mortgage insurance) is tax deductible and can be taken off after 5 years
Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions at all about getting approved for a FHA, VA or conventional Loan.
Warmest Regards,
Rob Chomentowski
Sr. Loan Officer (and FHA specialist)
858-922-7899
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