Thinking About a Tucson Second Home?
Celebrations of the winter solstice marked the full rotation of the earth around the sun. The shortest day of the year is behind us. Daylight increases with every passing day. Holiday cheer is abundant and in less than ten days, we will be welcoming 2009 with First Night celebrations.
Snowbirds, or to be politically correct, winter visitors will soon arrive. While much of the remainder of the country has snow, sleet, freezing weather, and bone chilling cold ahead of them, those people who make a pilgrimage to Tucson will be in for high 60’s and 70’s weather and increasing daylight – especially since Arizona does not turn it’s clock back!
For anyone thinking about purchasing a winter home, this is the time! Although many people pay cash, it may be worthwhile to think about taking a mortgage, especially since rates are 4.625% for a person with good credit scores who can put 20% down. The 1% loan origination fee charged on this $100,000 loan has a break even point of about four years. Principal and interest at that rate on $100,000 would be $514.14.
Wrapping the loan origination fee of 1% or $1,000 into the loan at a higher rate of 5% makes the payment $536.82. The difference is $22.68 a month. Dividing the $1,000 by $22.68 gives a break even point of 44.209 months, or nearly four years.
Although it has been the dream of everyone to be mortgage free, the exercise of examining one’s own mortality may be worthwhile. Looking at a 30 year mortgage, assuming I am 68 years old, what is the probability I will live to be 98? When really do I think I will die? Let’s see, my Mom died when she was x years old, and my Dad died when he was y years old…what does that say about my own gene pool? Hmmmm….I will probably die about 86 years old.
So if I have a 30 year mortgage, that means there will be an additional 12 years to pay off when I die. History has told us that inflation is inevitable… and let’s just calculate a mere 3% inflationary factor each year…interesting…that $100,000 in 2009 will become $245,684.22 in 2039! It may be more prudent for me to let my estate worry about that remaining 12 years…a consultation with a financial advisor or CPA, might be in order here.
History also tells us that regardless of the political affiliation of the administration, whenever we have a budget deficit, the government pays it off by printing money…i.e. inflation. So perhaps 3% is a low rate. If we were to experience 5% – a rate which has been consistent for Tucson between 1993 and 2004, the value then jumps to $446,774.49!
And then we add the income tax deduction which is calculated on the marginal tax rate…and the fact we keep our $100,000 in tact for other safe but more liquid investments…
Financing is a personal decision. But with the price of properties in Tucson now, including Active Adult Communities, people thinking about a second home should consider the advantages of acting now.
Resources:
Tucson Weather and Precipitation:
http://www.weather.com/weather/wxclimatology/monthly/graph/USAZ0247?from=tenDay_bottomnav_undeclared
Lenders:
Nova Home Loans:
Sundt Mortgage:
Realtor:
e-mail: terry@terrybishop.com
Housing Statistics 1993-2007:
See blog
Tags: Financing, Lenders, Tucson Homes, Tucson Real Estate