Because the money must be repaid, isn the first-time home buyer program really a zero-interest loan rather than a traditional tax credit?
Yes. Because the tax credit must be repaid, it operates like a zero-interest loan. Assuming an interest rate of 7%, that means the home owner saves up to $4,200 in interest payments over the 15-year repayment period. Compared to $7,500 financed through a 30-year mortgage with a 7% interest rate, the home buyer tax credit saves home buyers over $8,100 in interest payments. The program is called a tax credit because it operates through the tax code and is administered by the IRS. Also like a tax credit, it provides a reduction in tax liability in the year it is claimed.
Related Questions
- Because the money must be repaid, isn the first-time home buyer program really a zero-interest loan rather than a traditional tax credit?
- I’m involved in a consumer credit counseling program. Can I still qualify for a first-time home buyer loan?
- Does the City of Rancho Santa Margarita have a first-time home buyer program?
