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Buying Real Estate at Year End or Wait? – Points

Disregarding any government tax credits and stimulus activity for the moment, there could be a significant difference in buying a home in December as opposed to January.  We're not accountants, and aren't giving tax advice, but talk to your accounting professional if you're considering purchasing a home in the last couple of months of the year.

Among other things, the points you pay on a loan are normally considered pre-paid interest and are deductible in many cases.  So, when do you need a deduction more, this year or next?  But it's more than that.  As you can buy down your interest rate by paying increased points, is there a solid financial reason to increase your cash due at closing by increasing your point payment?  If you can buy down an already low rate, and take a tax deduction in the process, there may be some tax sense in the decision.

Look at it as a decision to let the government participate even further in securing the very lowest rate for your home mortgage.  If you can beat the current tax credit deadline, or it gets extended as some are predicting, there's that $8000 if you fit the first time buyer requirement.  Couple that with increasing points to get your rate down a bit more, and you may find that there are a number of tax-wise reasons to move on a home purchase.

Don't buy a home just for tax reasons, but a talk with a tax adviser about your options and situation could make a difference.  If a purchase is in your plans anyway, timing changes of just weeks can put money in your pocket.

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