Anytime one has the opportunity to receive money interest free it is a pretty much a home run. Further, chances are with the Obama stimulus plan, the repayment will probably be scratched.
Congrats on your purchase ! That is great news. The tax credit is a nice bonus for you especially if the repayment gets repealed. Also, the tax credit, as part of the new stimulus package, may be available to all buyers for the rest of 2009 which would be great. I think that it should be $22,500. That is what the Homebuilders are lobbying for.
There is no payback for the first two years. After that, there will be a $500 per year adjustment on your taxes for 15 years until the loan is repaid. There is NO INTEREST.
Once you start the payback it will be approximately $48+/- per month. If you think you will not be able to afford that in 2 years, then you should NOT apply for the credit, in my opinion. The other side of the coin is, there is a movement right now which is trying to make these tax credits be true credits with no repayment. You will have to decide if you want to take the risk, or not.
Carol Murray Cei
Congress is in the process of reviewing the 1st Time Homebuyer Tax Credit. The way it was passed for 2008, calls for a payback over 15 yrs at zero interest, with payments starting the 2nd year after purchase. Since nobody has even gotten any money yet (since they would get it with filing of 2008 Income Tax ) it is still possible that the government may restructure this program. Under the current plan, each year, as the buyer would file their income tax, they would repay 1/15th with their income tax.
Assuming most people get a refund each year, the assumption was that if you would have gotten say- $1500 refund normally, your refund would be $500 less (to pay back your years portion of the tax credit) but you'd still get $1,000 refund.
There is a possibility that this tax credit will be modified - and possibly have the repayment eliminated - or have it made as a "forgivable credit", ie: if you live in the home as your primary residence for say 3 yrs it wouldn't need to be repaid. We won't know until it finally gets passed.
But, for someone who is in the market to buy, finds a good deal, and has the financial means to do so- there are some wonderful buying opportunities. Just make sure you get good guidance from a knowledgable Real Estate Professional in the area you are going to buy.
All the Best!