I sold my home yesterday. I don’t think the fact has really sunk in since I am not moving out until early next month, but it’s a pretty big deal! The home is not like other homes as it is part of a public housing program to keep young professionals on Long Island. The program worked as follows:
- In a neighborhood of 130 55+ town homes 28 units were designated “Next Generation”
- Those 28 units had over 300 applicants when the program was announced in late 2006.
- There was a lottery. I was chosen as number 8
- That allowed me the opportunity to purchase the home for $250,000 which was significantly under market value in 2007 (even at the sale price of $298,000 I would say it is still $100K or $125K under market value)
- The sales price was connected to a formula that is tied to the town’s income not home values
- Any New Purchaser must be a first time home buyer
- The property must be used as a main residence (i.e. I can’t rent it).
So despite the worst housing correction in a generation I sold the property for a price $298,000 (maximum asking was $304K plus capital improvements). So I made a quick 20%, right? Not a chance and that is what I am curious about calculating.
Calculating if I Made Any Money on my Home Sale
As I deposited the checks today, I felt weird as I no longer owned the home that I really did/do love. I know we all look at the past in rose colored glasses but the the memories I have of this place bring a smile to my face. The Wife and I closed on the home about a year after I was out of law school and I was transitioning from my first job which I hated to the one that I still have now! I bought the house with The Wife before we were even married! It really does make me sad to think about leaving the place but I think that is because I am not particularly good with change.
The two things that may seem odd to others that I’ll miss are (1) Coming home for lunch to see The Wife and The Boy and (2) my neighbors. My neighbors freaking rule and when we were younger this meant black out nights with no driving but lately that means just a few beers when nothing is going on or a random BBQ on our shared driveway. Enough with the nostalgia! Lets do some math
How Much Interest Have I Paid on my Mortgage in 5 and a half Years
As most people know, a traditional mortgage is set up as a self completing amortization schedule where the amount you pay per month is the same but the percentage going to your interest versus your principal changes over the life of the note. Most of the interest is paid up front while major leaps in the principal occur at the end of the note. I threw my variables into a mortgage calculator:
- 40 Year Note (I was the only one on the mortgage and deed so I had a Debt to Income Ratio issue)
- 5.875% – good at the time but a terrible rate now
- Was at the home for 66 months – June 13, 2007 to December 10, 2012
This leads us to $73,714 in interest payments alone. My Taxes have ranged but lets call it an average of $5k/yr for the 5 and a half years – another $27,250. Lastly, we have maintenance payments of $300 x 66 months $19,800. So ignoring upgrades (of which we did few) and repairs (of which we did very few) we have a total cost of about $121,000. That is a lot less than my gain, huh?
If we are going to get specific the taxes and interest payments were tax deductible. Assuming a 20% effective tax rate then we have about $20,000 in deductions bringing the number down $100,000.
Would I do It Again?
1,000%. I believe the calculations I did are what most people would encounter if anyone did the math on their main residence.
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