somekevinguy wrote: ↑
Sun May 13, 2018 10:58 pm
Yes. The home we rent (which is quite nice) has a price/annual rent ratio of over 38 (being conservative)- more realistically about 45. That is the benefit of these home owners who literally pay property taxes of only a few thousand dollars a year due to prop 13 whereas if I were to buy the same home, the property taxes would jump by about 25K. There definitely is a premium on owning but with our plans to stay 20+ years and with the housing supplement from both of our employers factored in, the math becomes a little bit less clear. I highly doubt any home will fail to keep up with inflation and with interest free loans and straight salary supplement, if it is within budget and still allows us to save for retirement/other goals, can't help but thinking it still may be worth it.
I guess it depends -- just how much of a salary supplement is this? The interest-free loan is valuable. If you value the cost of funds at 4%, then that's about 18K/yr.
There is the golden handcuffs aspect. And if you're never moving, and never changing jobs, that's maybe less relevant. What if you have to leave the job for unexpected reasons (i.e. medical disability, or turmoil at the hospital, for example?)? Do you have to pay it off as a balloon payment? Since it's tied to your employer, you can't really think of it as a non-recourse loan, can you? But if you had to separate from your employer, what happens if you walk away from the loan?
Also, what the the tax implications on the 0% loan? Is that considered taxable income, taxed at your ~50% federal+state?
How much would it bother you if the market dipped a lot and you find yourself deeply under-water, on paper? Would you have buyer's remorse, or would it be irrelevant since you're in your house and not planning to leave so the price on paper is irrelevant?
Is this house because:
a) you need a place to live
b) you want the stability of having your own place so you won't need to move again
c) you want to participate in the potential appreciation of bay area housing