Home Buying Part 4: Budgeting with Kyle Seagraves

Katelyn Magnuson: 00:00:16

Hey, welcome back to confident money podcast.

Katelyn Magnuson: 00:00:18

I'm your host, Caitlin Magnuson.

Katelyn Magnuson: 00:00:20

And we have Kyle Seagraves with us to continue the series that we have been

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doing for the last couple of episodes.

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A little bit about Kyle.

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If you're just tuning in, Kyle's a certified mortgage advisor,

Katelyn Magnuson: 00:00:30

licensed loan originator, and the owner of win the house.

Katelyn Magnuson: 00:00:33

You love a YouTube channel with over a hundred thousand subscribers.

Katelyn Magnuson: 00:00:37

Kyle, welcome back.

Katelyn Magnuson: 00:00:39

Uh, today we're gonna be chatting all about.

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Budgets financing, renting versus owning and kind of the nitty gritty

Katelyn Magnuson: 00:00:48

of what the numbers look like when

Kyle Seagraves: 00:00:52

Yeah, I think this is one of the more overwhelming pieces,

Kyle Seagraves: 00:00:55

I think for a lot of people it's okay.

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Can I get approved for mortgage?

Kyle Seagraves: 00:00:58

But then number two is how do all of these numbers work?

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Because there are a ton of different numbers.

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and, uh, they can be really overwhelming because a lot of 'em are estimates.

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And I think this is the, for most people, the largest purchase, they've ever made.

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And so they've heard horror stories or, um, just not used to spending that much

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money or seeing numbers that are that big.

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And so, uh, it can be overwhelming, but it doesn't have to be, especially

Kyle Seagraves: 00:01:23

if you have a good plan and you understand how everything works, it's

Kyle Seagraves: 00:01:26

gonna make it a lot easier as you move, move forward with a home buying.

Katelyn Magnuson: 00:01:30

Absolutely.

Katelyn Magnuson: 00:01:31

And I think when we are talking about budget, I know earlier, when you had

Katelyn Magnuson: 00:01:35

mentioned, you know, qualifying for a loan, we had talked about, you know,

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you normally have a certain amount of debt to income ratio that you

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you could have and be approved for.

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And I believe that can vary depending on the type of loan, but you know, what

Katelyn Magnuson: 00:01:47

is kind of the maximum that people are looking at when they're getting approved.

Kyle Seagraves: 00:01:52

Yeah.

Kyle Seagraves: 00:01:53

All loans are different.

Kyle Seagraves: 00:01:55

And like we talked about in some of the other episodes they're all based on a

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computer's decision most of the time.

Kyle Seagraves: 00:02:00

However, a good rule of thumb is, uh, around 45% maximum debt income ratio.

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And so what that includes is gonna be your monthly, uh, debt payments.

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So things like, uh, and these are all minimum payments,

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not what you actually pay.

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So the minimum payment on a credit card, minimum payment on

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a student loan on a car loan.

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And then also that's going to include, uh, your future mortgage payment.

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And that future mortgage payment is gonna be principle, interest,

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taxes, and insurance as well.

Kyle Seagraves: 00:02:27

So, um, what the easiest way to figure that out is to take your

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monthly gross income and multiply at times 0.45 from there, subtract

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your minimum monthly debt payments.

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So maybe you have, you know, a hundred bucks on a credit card, 300

Kyle Seagraves: 00:02:41

bucks on a, a car, take that away.

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And then you have the max that you can pay on a mortgage.

Katelyn Magnuson: 00:02:47

to do it.

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And.

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I know that I get asked this a lot.

Katelyn Magnuson: 00:02:50

I'm sure you get asked this a lot, but let's say you're able to get

Katelyn Magnuson: 00:02:53

approved for a loan that allows you to have a debt to income ratio of 45%.

Katelyn Magnuson: 00:02:59

And you're happy with what that looks like.

Katelyn Magnuson: 00:03:01

It allows you to afford homes in your area with whatever your

Katelyn Magnuson: 00:03:03

personal debt situation is.

Katelyn Magnuson: 00:03:06

What is the general rule of thumb or the best practice when it comes?

Katelyn Magnuson: 00:03:11

And we're, I know we're gonna chat about this further in more detail, but.

Katelyn Magnuson: 00:03:15

When it comes to, should you go for a loan or move forward with a loan that puts your

Katelyn Magnuson: 00:03:20

debt to income ratio at 45% of your income of your, you know, household situation?

Kyle Seagraves: 00:03:27

You get no prize for going all the way to the

Kyle Seagraves: 00:03:29

maximum of how much you can afford.

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and so that's where a lot of people talk about the difference between what you.

Kyle Seagraves: 00:03:36

Should qualify for what the mortgage payment you should have versus the

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mortgage payment you could have.

Kyle Seagraves: 00:03:42

Um, most people are actually really surprised when they see how much

Kyle Seagraves: 00:03:45

they could get approved for and on the good side, this is what a lender

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would be willing to offer you.

Kyle Seagraves: 00:03:51

And it's all based on risk.

Kyle Seagraves: 00:03:53

So how risky do they think you are?

Kyle Seagraves: 00:03:55

Uh, the less risky, the more money.

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Going to be willing to lend to you.

Kyle Seagraves: 00:03:59

So on the good side, that's where we're looking somewhere around the 45% range.

Kyle Seagraves: 00:04:03

There are some programs that go up to 56.9, 9%, like where most

Kyle Seagraves: 00:04:08

of your income goes to debt.

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I wouldn't recommend going that high again, there's zero prize there.

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And it's important to realize too, that a loan officer is not a financial advisor.

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there are a lot of really great ethical professionals who can help you,

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understand your budget, but ultimately they, they are not there to help.

Kyle Seagraves: 00:04:26

You have a really sturdy budget.

Kyle Seagraves: 00:04:28

They're there to help you get a mortgage.

Kyle Seagraves: 00:04:31

Um, and so it's important to keep that in mind not that they would

Kyle Seagraves: 00:04:34

push you into something, but they're not keeping tabs on your budget.

Kyle Seagraves: 00:04:38

Like you are.

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You're the one who lives in that day in day out.

Kyle Seagraves: 00:04:41

So maybe we don't take advice from the person who isn't living inside of our

Kyle Seagraves: 00:04:45

budget, on what we feel comfortable with.

Kyle Seagraves: 00:04:48

Right.

Kyle Seagraves: 00:04:48

Just because we could qualify for something according to a lender

Kyle Seagraves: 00:04:51

doesn't mean it makes sense for us because there's more that goes

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on in our budget than just debt.

Kyle Seagraves: 00:04:56

There's also savings goals.

Kyle Seagraves: 00:04:58

Uh, maybe you have, I mean, Million other things that we're spending

Kyle Seagraves: 00:05:01

money on that we care about than just, you know, our credit card payments

Kyle Seagraves: 00:05:04

and car loans and things like that.

Kyle Seagraves: 00:05:06

So then that brings on the question of what, uh, what

Kyle Seagraves: 00:05:08

mortgage payments should we have.

Kyle Seagraves: 00:05:10

And obviously the lower is better there.

Kyle Seagraves: 00:05:13

No one really just wants to have a higher mortgage payment for the sake of it.

Kyle Seagraves: 00:05:16

and so this is where it's hard though, to figure out like what's a good rule

Kyle Seagraves: 00:05:19

of thumb because this changes for people depending on their situation,

Kyle Seagraves: 00:05:23

depending on their income, um, someone who is making $200,000 a year, A lot

Kyle Seagraves: 00:05:28

more discretionary income than somebody who is making 40 to $50,000 per year.

Kyle Seagraves: 00:05:34

And so using, uh, percentages is, um, not the most ideal, but can help us

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get a good framework to begin with.

Kyle Seagraves: 00:05:42

So usually what I recommend to people is looking at 28% of their gross

Kyle Seagraves: 00:05:47

income, um, is a really ideal maximum.

Kyle Seagraves: 00:05:51

Now someone who has a lower income might have to have a higher that's income.

Kyle Seagraves: 00:05:57

Um, to find safe housing that works for them.

Kyle Seagraves: 00:06:01

Whereas somebody who makes higher income might be able to reduce that.

Kyle Seagraves: 00:06:05

And also with how home values have been increasing sometimes for a lot

Kyle Seagraves: 00:06:09

of people, those ratios are increasing as well because it's getting more and

Kyle Seagraves: 00:06:14

more difficult to find a home that could fit in that, uh, more affordable.

Katelyn Magnuson: 00:06:19

Absolutely.

Katelyn Magnuson: 00:06:19

And I think I know that you and I chatted about this, but it also is dependent

Katelyn Magnuson: 00:06:23

upon what your personal financial goals are or what matters to you.

Katelyn Magnuson: 00:06:26

Right?

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So are you just looking for a place to rest your head at

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night and you don't really care?

Katelyn Magnuson: 00:06:31

Maybe if you have a backyard.

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Or if you're in a super walkable neighborhood, or if you're in a certain

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school district, there are different factors that are so individual, you

Katelyn Magnuson: 00:06:40

know, for, for me, I, our neighborhood has a walkable score of zero because we

Katelyn Magnuson: 00:06:44

don't have sidewalks or public roads.

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Um, but for someone else that had kids that you know, was looking to.

Katelyn Magnuson: 00:06:50

, you know, maximize a really great school district for them.

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Their priority may be finding something that's there.

Katelyn Magnuson: 00:06:55

And that may mean that they're paying a little bit more out of pocket

Katelyn Magnuson: 00:06:58

or, you know, they're able to do that as well as when someone lives

Katelyn Magnuson: 00:07:02

in a higher cost of living area.

Katelyn Magnuson: 00:07:03

You're normally going to see a higher percentage of their overall

Katelyn Magnuson: 00:07:07

income spent on their housing expense because they're housing expense

Katelyn Magnuson: 00:07:09

because that's, it just is what it is.

Katelyn Magnuson: 00:07:11

It's more expensive to live in those area.

Kyle Seagraves: 00:07:15

Yeah.

Kyle Seagraves: 00:07:15

And I think of the budgeting conversation too.

Kyle Seagraves: 00:07:17

A lot of people forget that, uh, you don't have to buy the dream perfect home right

Kyle Seagraves: 00:07:23

now, especially if this is your first home, like let's throw away that idea.

Kyle Seagraves: 00:07:27

I think the idea of a dream home is stupid because like, if I think about

Kyle Seagraves: 00:07:30

what I liked, not even just with housing, just with anything, a, a paint color in

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this office two years ago, I liked it.

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And now I'm like, ah, I could change it.

Kyle Seagraves: 00:07:38

So like, same thing happens with, with a house, with everything that you buy in.

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Your preferences are gonna change over time.

Kyle Seagraves: 00:07:45

And I think it's a really big mistake.

Kyle Seagraves: 00:07:48

We set ourselves up for emotional failure.

Kyle Seagraves: 00:07:49

When we say I have to buy the dream home and it has to fit into this budget.

Kyle Seagraves: 00:07:54

Well, you're expecting this, like in, in our mind, we're like we want the

Kyle Seagraves: 00:07:58

lifelong home to fit in with maybe our income in a career that we just started

Kyle Seagraves: 00:08:03

our business that we just started.

Kyle Seagraves: 00:08:04

Or we're not, we're in like growth phase, but over here,

Kyle Seagraves: 00:08:07

we're in permanent, lifelong

Katelyn Magnuson: 00:08:09

Right

Kyle Seagraves: 00:08:10

and they're not match.

Kyle Seagraves: 00:08:11

Yeah.

Kyle Seagraves: 00:08:12

Uh, and so we don't have to have the dream home just yet.

Kyle Seagraves: 00:08:16

Uh, the way most people buy homes, what works really well is actually

Kyle Seagraves: 00:08:19

kind of like a stepping stone.

Kyle Seagraves: 00:08:21

We buy the first home, what a lot of people call a starter home.

Kyle Seagraves: 00:08:24

What's something that can fit in our budget that meets most of the

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goals that we have for the house.

Kyle Seagraves: 00:08:29

Maybe the school district that we want, uh, maybe it's not, doesn't have the

Kyle Seagraves: 00:08:32

perfect yard, but has a good enough yard.

Kyle Seagraves: 00:08:35

And we live in that home.

Kyle Seagraves: 00:08:36

It builds up appreciation, and then we can either sell or rent that.

Kyle Seagraves: 00:08:39

Use money to then buy the next home.

Kyle Seagraves: 00:08:42

That's even better and work our way through a stepping stone rather than

Kyle Seagraves: 00:08:46

trying to fit this lifelong goal into our budget that might not be

Kyle Seagraves: 00:08:51

able to accommodate it at the moment.

Katelyn Magnuson: 00:08:54

No, I couldn't agree more with that.

Katelyn Magnuson: 00:08:55

And I think, especially when you're looking at down payments and

Katelyn Magnuson: 00:08:58

increasing home prices, I know that for us, the house that we're in now

Katelyn Magnuson: 00:09:02

was so much more accessible because we had purchased that starter home.

Katelyn Magnuson: 00:09:06

That was.

Katelyn Magnuson: 00:09:08

It was what it was at the time I loved it.

Katelyn Magnuson: 00:09:10

I was very excited.

Katelyn Magnuson: 00:09:11

It served its purpose.

Katelyn Magnuson: 00:09:13

And I think that a lot of us get so emotionally invested in the house

Katelyn Magnuson: 00:09:18

that we're looking to purchase versus looking at it to an extent

Katelyn Magnuson: 00:09:22

from a numbers perspective, right.

Katelyn Magnuson: 00:09:23

Because it is it's, it's a huge purchase and it's someone that you're

Katelyn Magnuson: 00:09:26

gonna spend a lot of time, but it also doesn't have to be permanent.

Kyle Seagraves: 00:09:30

absolutely.

Kyle Seagraves: 00:09:31

Yeah.

Kyle Seagraves: 00:09:33

Yeah.

Kyle Seagraves: 00:09:33

It doesn't have to be the perfect home right away.

Katelyn Magnuson: 00:09:36

Exactly.

Katelyn Magnuson: 00:09:36

And maybe you make it your perfect home.

Katelyn Magnuson: 00:09:38

Maybe it becomes your perfect home, but you know, give it five to 10 years

Katelyn Magnuson: 00:09:42

and maybe your taste will have changed.

Katelyn Magnuson: 00:09:44

I know mine certainly did.

Katelyn Magnuson: 00:09:45

And my budget was able to change during that time as well, both due to increased

Katelyn Magnuson: 00:09:49

earning power, as well as having, you know, equity established in the house

Katelyn Magnuson: 00:09:53

that did it made a really big difference.

Katelyn Magnuson: 00:09:55

When we're looking at that and when we're looking to buy.

Katelyn Magnuson: 00:09:58

What are we looking at for a lot of loans for, you know, monthly and

Katelyn Magnuson: 00:10:01

upfront costs, once someone gets established and actually, you know, has

Katelyn Magnuson: 00:10:05

a loan goes through the home purchase process and they're, they're in it.

Katelyn Magnuson: 00:10:08

What does that look like for them?

Katelyn Magnuson: 00:10:10

I.

Kyle Seagraves: 00:10:11

Yeah.

Kyle Seagraves: 00:10:11

So these, this is one of the hardest parts to go through with an estimate on, because

Kyle Seagraves: 00:10:17

there's so many different variables, depending on where somebody's at the

Kyle Seagraves: 00:10:20

loan program that they're looking at.

Kyle Seagraves: 00:10:21

Um, I do have a tool that I call the max, uh, purchase price calculator,

Kyle Seagraves: 00:10:25

where you can put in your income and your debts, and it will show you.

Kyle Seagraves: 00:10:27

A recommended maximum purchase price and help you estimate some numbers.

Kyle Seagraves: 00:10:31

Um, but really for a lot of people, it's kinda like what we talked about in some

Kyle Seagraves: 00:10:34

other episodes where the best way to get the most accurate numbers is to just

Kyle Seagraves: 00:10:39

talk with somebody, talking with a loan officer and saying, Hey, I'm kind of in

Kyle Seagraves: 00:10:43

the spot where like, I don't, I don't even know what these numbers look like.

Kyle Seagraves: 00:10:46

Could you help me figure this out?

Kyle Seagraves: 00:10:48

Because often what a lot of people do is they kind of do all the steps backwards.

Kyle Seagraves: 00:10:53

They're like we wanna find a house.

Kyle Seagraves: 00:10:54

So they look@homesonlikezilloworrealtor.com

Kyle Seagraves: 00:10:57

and then they see the little monthly payment thing.

Kyle Seagraves: 00:10:59

Well, the, the monthly payment that's recommended there

Kyle Seagraves: 00:11:02

is the best case scenario.

Kyle Seagraves: 00:11:04

That's if you're putting 20% down.

Kyle Seagraves: 00:11:06

Uh, so there's no mortgage insurance, like we talked about on the loan

Kyle Seagraves: 00:11:10

requirements, episode, you know, the taxes may not be accurate.

Kyle Seagraves: 00:11:14

Uh, home insurance is always like ridiculously low.

Kyle Seagraves: 00:11:17

And so people run off of that number.

Kyle Seagraves: 00:11:19

And then they don't all they think about is the down payment.

Kyle Seagraves: 00:11:22

So maybe it's 3% down on a conventional loan or three and a

Kyle Seagraves: 00:11:26

half percent down on an FHA loan.

Kyle Seagraves: 00:11:28

And so in their mind, they're thinking those are the only costs.

Kyle Seagraves: 00:11:30

It's gonna be a low, monthly payment.

Kyle Seagraves: 00:11:31

We can afford that.

Kyle Seagraves: 00:11:32

And a low down payment, we can afford that.

Kyle Seagraves: 00:11:35

And then they go through the mortgage process and realize, wait, okay,

Kyle Seagraves: 00:11:38

well, we were only putting 3% down.

Kyle Seagraves: 00:11:40

So that changed the monthly payment quite a bit.

Kyle Seagraves: 00:11:43

Um, also.

Kyle Seagraves: 00:11:45

The taxes now that we see that what the accurate ones are,

Kyle Seagraves: 00:11:48

are higher than we anticipated.

Kyle Seagraves: 00:11:50

And then also the upfront costs also have closing costs associated with

Kyle Seagraves: 00:11:53

buying any home, whether we're buying with a loan or with cash, there's going

Kyle Seagraves: 00:11:57

to be closing costs involved there.

Kyle Seagraves: 00:11:59

And a lot of people get stopped in that moment.

Kyle Seagraves: 00:12:02

This is where a lot of, kind of some beginner's bio remorse comes

Kyle Seagraves: 00:12:06

in because they didn't do planning front to see what the numbers were.

Kyle Seagraves: 00:12:10

They jumped in on a home before they were confident in what the numbers were,

Kyle Seagraves: 00:12:13

and really we can, uh, guess and use like really good estimates all day long.

Kyle Seagraves: 00:12:20

But it's not until we talk with somebody who can actually see our situ.

Kyle Seagraves: 00:12:23

Show us examples of programs and lay out those numbers for us, that

Kyle Seagraves: 00:12:27

we can get a really solid idea.

Kyle Seagraves: 00:12:28

So when you do talk with a loan officer and you start to get

Kyle Seagraves: 00:12:31

preapproved, they'll give you a quote.

Kyle Seagraves: 00:12:34

And in that loan quote, um, we want several things.

Kyle Seagraves: 00:12:37

We wanna know what kind of program, uh, they're gonna offer us.

Kyle Seagraves: 00:12:40

Um, also the terms like, is it a 30 year loan?

Kyle Seagraves: 00:12:42

Is it a 15 year loan?

Kyle Seagraves: 00:12:45

And then from there, they're gonna break down the monthly payment.

Kyle Seagraves: 00:12:47

So what we're paying on principle and interest for the loan, what we're

Kyle Seagraves: 00:12:50

paying in property taxes to the county.

Kyle Seagraves: 00:12:53

Also what we're paying in homeowner's insurance, they're gonna estimate

Kyle Seagraves: 00:12:56

that, any mortgage insurance, if we're, uh, putting less than 20% down on a

Kyle Seagraves: 00:13:00

conventional loan or we're using any type of government loan, other than

Kyle Seagraves: 00:13:04

VA, and they're going to list all those out so we can see a total there.

Kyle Seagraves: 00:13:09

And then for upfront costs, they're gonna show us the down payment, but

Kyle Seagraves: 00:13:12

also they're going to estimate all the other costs with buying a home.

Kyle Seagraves: 00:13:15

So things like, uh, getting your appraisal, um, title insurance, a

Kyle Seagraves: 00:13:20

title report, any recording fees or taxes from the county that you're in.

Kyle Seagraves: 00:13:24

and then also your escrow account, which is going to set up a small

Kyle Seagraves: 00:13:28

account for taxes and insurance set aside upfront for you.

Kyle Seagraves: 00:13:32

Um, so that quote is actually gonna show you both the monthly

Kyle Seagraves: 00:13:35

payment and the upfront costs.

Kyle Seagraves: 00:13:38

All together on one or two pages.

Kyle Seagraves: 00:13:40

She can have a really solid idea moving forward rather than just, oh, we saw

Kyle Seagraves: 00:13:43

this on Zillow and it looks good enough.

Kyle Seagraves: 00:13:46

So we move forward with it.

Katelyn Magnuson: 00:13:48

No, I, I definitely fell into that trap.

Katelyn Magnuson: 00:13:49

I think when I was looking to buy my first house where I hopped on Zillow,

Katelyn Magnuson: 00:13:52

I was like, oh, this looks great.

Katelyn Magnuson: 00:13:53

And then yeah, you look into it.

Katelyn Magnuson: 00:13:54

And they're like, oh, this is a 20% down payment and everything else.

Katelyn Magnuson: 00:13:57

And I was like,

Kyle Seagraves: 00:13:57

Yeah.

Kyle Seagraves: 00:13:57

yeah.

Katelyn Magnuson: 00:13:58

okay.

Katelyn Magnuson: 00:13:59

So what I thought would be seven 50 a month is actually 1100 a month kind of

Katelyn Magnuson: 00:14:03

changes things, especially with the first

Kyle Seagraves: 00:14:05

Yeah, I'm going through this right now with a house that I'm

Kyle Seagraves: 00:14:07

buying, the lady who lives there.

Kyle Seagraves: 00:14:09

Um, according to the county, she only pays a thousand dollars a year in taxes.

Kyle Seagraves: 00:14:13

Uh that's because she gets a home set exemption.

Kyle Seagraves: 00:14:15

She, because she's above 65, uh, also the home, when she bought it, was like

Kyle Seagraves: 00:14:21

a quarter of the value that it is.

Kyle Seagraves: 00:14:24

So it hasn't been reassessed.

Kyle Seagraves: 00:14:25

So the moment that I buy the house for four times, the value that she

Kyle Seagraves: 00:14:27

bought it years ago, all of a sudden that gets put in the tax records.

Kyle Seagraves: 00:14:31

And then also I'm at above 65.

Kyle Seagraves: 00:14:33

So I don't get that exemption.

Kyle Seagraves: 00:14:35

so my taxes are probably gonna quadruple.

Kyle Seagraves: 00:14:39

So it's even those things of, oh, I could look online and see, but if

Kyle Seagraves: 00:14:42

you're not talking with somebody who can help you understand these things, it's

Kyle Seagraves: 00:14:46

very easy for people to say, oh, taxes are only a thousand dollars a year.

Katelyn Magnuson: 00:14:49

Yeah.

Kyle Seagraves: 00:14:50

Uh, and then you're gonna get a bill and it's 4,000 a year.

Kyle Seagraves: 00:14:52

And like, oh my gosh, this is completely different.

Kyle Seagraves: 00:14:55

How was this not caught?

Kyle Seagraves: 00:14:57

Um, and that's why it's usually best to talk with a professional before we get

Kyle Seagraves: 00:15:01

really comfortable with the numbers.

Katelyn Magnuson: 00:15:03

Absolutely.

Katelyn Magnuson: 00:15:04

Now I have thoughts on this and I'm interested to hear your thoughts

Katelyn Magnuson: 00:15:07

on this, but there are quite a few different loan terms, right?

Katelyn Magnuson: 00:15:11

We

Kyle Seagraves: 00:15:11

Mm-hmm

Katelyn Magnuson: 00:15:12

year, 15 year, 30 year, like there there's a whole

Katelyn Magnuson: 00:15:14

variety of them and obviously.

Katelyn Magnuson: 00:15:18

My thoughts on this depend on, you know, what your personal financial

Katelyn Magnuson: 00:15:21

goals are, but I know that there can be a really popular thought we're

Katelyn Magnuson: 00:15:25

gonna say should again but that you should pay off your debt or you should

Katelyn Magnuson: 00:15:31

pay it off as quickly as possible.

Katelyn Magnuson: 00:15:32

again, depending on your personal financial goals, I disagree with that, but

Katelyn Magnuson: 00:15:36

I would love to hear your thoughts on, you know, the financing terms for mortgage.

Katelyn Magnuson: 00:15:40

Uh,

Kyle Seagraves: 00:15:41

Yeah.

Kyle Seagraves: 00:15:42

Um, so you're talking kind of more specifically like

Kyle Seagraves: 00:15:44

the 30, 15 kind of how many

Katelyn Magnuson: 00:15:47

I would say more specif the 30, 15.

Katelyn Magnuson: 00:15:48

I feel like those are the two most common options that come about for people.

Kyle Seagraves: 00:15:53

Yeah.

Kyle Seagraves: 00:15:53

So that is a, a big question people have.

Kyle Seagraves: 00:15:56

And if you're in that position where you can entertain the conversation

Kyle Seagraves: 00:15:59

between a 30 year and a 15 year mortgage already, you're in a very good position.

Kyle Seagraves: 00:16:04

Most people can't entertain a 15 year mortgage because the monthly payment

Kyle Seagraves: 00:16:08

is so much higher cuz we're only paying it off over 15 years rather than 30.

Kyle Seagraves: 00:16:12

So if you're in that spot, I know sometimes we can get like, decision

Kyle Seagraves: 00:16:16

paralysis, like you're in a really good position if that's the case already.

Kyle Seagraves: 00:16:20

So just know like at this point it's more about how do we squeeze out a little bit

Kyle Seagraves: 00:16:24

extra savings in our, our choices here.

Kyle Seagraves: 00:16:27

so.

Kyle Seagraves: 00:16:29

A 15 year loan obviously is gonna have a higher monthly payment than a 30 year,

Kyle Seagraves: 00:16:34

cuz we're paying it off in half the time.

Kyle Seagraves: 00:16:36

the difference in these though is that these are the required monthly

Kyle Seagraves: 00:16:40

payments in that if you miss a payment.

Kyle Seagraves: 00:16:44

It's going to reflect on your credit report and a mortgage late is a

Kyle Seagraves: 00:16:48

huge deal on your credit score.

Kyle Seagraves: 00:16:50

Having a late mortgage payment will completely derail your credit score and

Kyle Seagraves: 00:16:54

is really difficult to recover from.

Kyle Seagraves: 00:16:57

So in my opinion, I would rather have the lower required monthly payment on a 30

Kyle Seagraves: 00:17:04

year and pay it as if it was a 15 year.

Kyle Seagraves: 00:17:08

It's very easy to do.

Kyle Seagraves: 00:17:09

So let's say the 15 year mortgage was, let's say $1,800 per month.

Kyle Seagraves: 00:17:15

And the 30 year mortgage was, let's say, $1,100 per month.

Kyle Seagraves: 00:17:19

It's very easy to pay the 1100 mortgage payment plus an additional $700 towards

Kyle Seagraves: 00:17:25

the principal of the mortgage every month.

Kyle Seagraves: 00:17:27

We're paying it the same monthly payment as a 15 year, and we're gonna pay it off

Kyle Seagraves: 00:17:30

in just about the same amount of time.

Kyle Seagraves: 00:17:33

Now, a 15 year loan is gonna have a lower interest rate.

Kyle Seagraves: 00:17:35

Uh, not crazy.

Kyle Seagraves: 00:17:37

Like significantly lower, but it will have a lower interest rate than the 30 year.

Kyle Seagraves: 00:17:41

And so that's why people do have some interest in it.

Kyle Seagraves: 00:17:44

But even if you run those numbers side by side, the savings that you'll get

Kyle Seagraves: 00:17:49

on a 15 year, if you pay the 30 year, like the 15 is pretty negligible.

Kyle Seagraves: 00:17:54

And if you wanna take it a step further, if you're kind of more into the investment

Kyle Seagraves: 00:17:58

side, an even better decision, most of the time is to take the third year,

Kyle Seagraves: 00:18:03

take that $700 and actually invest.

Kyle Seagraves: 00:18:05

Into something like an S and P 500 ETF and earn an average 10% growth on that money,

Kyle Seagraves: 00:18:12

rather than paying off the mortgage, you actually benefit a lot better by using

Kyle Seagraves: 00:18:17

that strategy than going with the 15 year.

Kyle Seagraves: 00:18:19

So that coupled with other things like, uh, the fact that

Kyle Seagraves: 00:18:22

inflation actually eats away.

Kyle Seagraves: 00:18:24

At your mortgage balance over time where it actually is beneficial to

Kyle Seagraves: 00:18:28

hold a loan over a long period of time, because inflation is reducing

Kyle Seagraves: 00:18:32

the balance of the money comparative to the cost of the dollar makes

Kyle Seagraves: 00:18:36

me wanna lean more towards the 30.

Kyle Seagraves: 00:18:39

And then one last practical piece I feel like is beneficial of the 30 year

Kyle Seagraves: 00:18:43

is when things happen like COVID and you have either reduction in hours

Kyle Seagraves: 00:18:47

or income or laid off from a job.

Kyle Seagraves: 00:18:50

I would rather be able to fall back to a lower required monthly payment on the 30

Kyle Seagraves: 00:18:55

year than have that high 15 year payment.

Katelyn Magnuson: 00:18:58

Absolutely.

Katelyn Magnuson: 00:18:59

I couldn't agree more with everything that you said.

Katelyn Magnuson: 00:19:01

So I understand that there's a psychological benefit to being

Katelyn Magnuson: 00:19:05

debt free for some people.

Katelyn Magnuson: 00:19:06

And I'm not discounting that in the slightest, but.

Katelyn Magnuson: 00:19:10

I cannot express how grateful I was a to be in a position.

Katelyn Magnuson: 00:19:15

Cuz you brought up it's it's a really privileged position when we refinanced

Katelyn Magnuson: 00:19:19

the house that we were in before we were able to choose between a 15 and a 30.

Katelyn Magnuson: 00:19:22

And for us at that time, I went with the 30, for exactly that reason.

Katelyn Magnuson: 00:19:26

It gave me more flexibility.

Katelyn Magnuson: 00:19:28

And then I, at the time I was paying more towards the mortgage, but in hindsight,

Katelyn Magnuson: 00:19:33

and what I'm doing now is we have a 30 year mortgage and the extra money that

Katelyn Magnuson: 00:19:36

I would like to be paying towards that is absolutely being invested right now.

Katelyn Magnuson: 00:19:40

Because if I have, let's say a three point something percent, you know,

Katelyn Magnuson: 00:19:44

interest mortgage, and I'm getting an average over 10 years of a 10%, you

Katelyn Magnuson: 00:19:49

know, per year return on my invest.

Katelyn Magnuson: 00:19:52

The negative interest that I'm paying is dramatically, you know,

Katelyn Magnuson: 00:19:57

overcompensated for by the interest that I'm earning on my investments.

Katelyn Magnuson: 00:20:00

And then if I get to a spot where I'm unemployed or I'm underemployed, or

Katelyn Magnuson: 00:20:06

there is a financial disaster that comes through, I have money in investments that

Katelyn Magnuson: 00:20:10

I can pull on and I'm able to use those to cover my mortgage or to do things.

Katelyn Magnuson: 00:20:14

But my monthly requirements are lower.

Katelyn Magnuson: 00:20:17

I think is really great to have, because at the end of the day, it is my

Katelyn Magnuson: 00:20:20

required mortgage payment is like what?

Katelyn Magnuson: 00:20:23

$1,500, less than it would've been,

Katelyn Magnuson: 00:20:25

which

Katelyn Magnuson: 00:20:25

is that that's a

Katelyn Magnuson: 00:20:26

big lifeline.

Kyle Seagraves: 00:20:26

And what's.

Kyle Seagraves: 00:20:27

Is, if you wanna pay off the mortgage, you can still do it in the same amount

Kyle Seagraves: 00:20:30

of time with the investment strategy, because you're gonna have all this

Kyle Seagraves: 00:20:33

money accumulating in an account actually quicker than if you just

Kyle Seagraves: 00:20:37

it's gonna be earning interest versus, uh, you know, you paying interest.

Kyle Seagraves: 00:20:42

So by the time it gets to your mortgage payment, if you still wanna

Kyle Seagraves: 00:20:44

be mortgage free, you can pull it out of your investments and pay off your

Kyle Seagraves: 00:20:48

home actually quicker than if you just put it straight into the mortgage.

Katelyn Magnuson: 00:20:52

Absolutely.

Katelyn Magnuson: 00:20:53

And I, I think the last idea that you had mentioned about, you know,

Katelyn Magnuson: 00:20:57

inflation, and I think that that can be a little bit convoluted for people, but

Katelyn Magnuson: 00:21:02

I think that we're seeing that right now, when you are able to borrow money.

Katelyn Magnuson: 00:21:06

So to speak at a lower rate than inflation.

Katelyn Magnuson: 00:21:10

I think not taking advantage of that if you're able to is unwise.

Katelyn Magnuson: 00:21:14

And that's the other reason that I'm personally not looking to pay my

Katelyn Magnuson: 00:21:17

mortgage off early at this point in my life, because that money is like

Katelyn Magnuson: 00:21:22

inflation was what, six or 7% this year.

Katelyn Magnuson: 00:21:25

So dollars that I have, you know, are becoming worth less.

Katelyn Magnuson: 00:21:28

But by having the home and not paying it off early, I'm actually making it

Katelyn Magnuson: 00:21:31

making out ahead because my dollars every year are worth more money.

Kyle Seagraves: 00:21:35

Yeah.

Kyle Seagraves: 00:21:36

Absolutely.

Kyle Seagraves: 00:21:37

It aligns a lot with what you've talked about with the anti

Kyle Seagraves: 00:21:39

budget of being able to automate

Kyle Seagraves: 00:21:43

a lot of these things where I think , I've heard most people when they

Kyle Seagraves: 00:21:47

talk about a 15 year they're like it forces me to save money, like, okay,

Kyle Seagraves: 00:21:52

there is way better ways to do this than to get into a like contractual

Kyle Seagraves: 00:21:55

obligation for 15 years on one payment, uh, where you can still have the 30.

Kyle Seagraves: 00:22:01

Automate your budget with whatever tools you would recommend into saying, okay,

Kyle Seagraves: 00:22:06

I'm gonna take that 500, 700, whatever that difference is, and invest that

Kyle Seagraves: 00:22:10

into whatever, whatever account maybe it's funding an IRA to begin with.

Kyle Seagraves: 00:22:16

Maybe you're putting into a taxable account into some ETFs or, whatever you

Kyle Seagraves: 00:22:20

want in those becomes really easy to do.

Kyle Seagraves: 00:22:24

And it's all hands free without you having to do that.

Kyle Seagraves: 00:22:27

Every single.

Katelyn Magnuson: 00:22:28

No.

Katelyn Magnuson: 00:22:28

And again, you can automate paying your mortgage up at least with most lenders, if

Katelyn Magnuson: 00:22:32

that was your priority or automate savings goals or automate your other goals.

Katelyn Magnuson: 00:22:36

And I think that, and I, I have, I've heard that before.

Katelyn Magnuson: 00:22:39

Well, if it's the 15 year, then I have to pay it.

Katelyn Magnuson: 00:22:41

Right.

Katelyn Magnuson: 00:22:41

There's there's big consequences, but.

Kyle Seagraves: 00:22:44

yeah.

Katelyn Magnuson: 00:22:45

I mean, having gone through COVID and having seen what a lot

Katelyn Magnuson: 00:22:47

of our clients experienced I definitely would advise against it if you don't have

Katelyn Magnuson: 00:22:51

to get a 15 year loan I mean, I don't know a circumstance in which you would

Katelyn Magnuson: 00:22:54

have to, but why, why would you do that?

Katelyn Magnuson: 00:22:56

Why would you put that pressure on yourself when, okay.

Katelyn Magnuson: 00:22:58

Maybe you save a hundred dollars less.

Katelyn Magnuson: 00:23:00

Maybe you get takeout, you know, a couple times a month because

Katelyn Magnuson: 00:23:04

you have a little bit more flex.

Katelyn Magnuson: 00:23:06

I don't think that's the worst thing in the world either so long as you're

Katelyn Magnuson: 00:23:08

still meeting your financial goals.

Katelyn Magnuson: 00:23:10

So with that Kyle when you're looking to, you know, get your loan and to,

Katelyn Magnuson: 00:23:14

to finance, and you're looking at the 15 versus the 30 and all these other

Katelyn Magnuson: 00:23:18

factors that come in, I know that a lot of people ask about points and you

Katelyn Magnuson: 00:23:24

know, what that kind of means for them.

Katelyn Magnuson: 00:23:25

And should they, you know, should they move forward with it and how to decide.

Kyle Seagraves: 00:23:30

Yeah, I really don't like points that much.

Kyle Seagraves: 00:23:34

I'll back up for a second.

Kyle Seagraves: 00:23:36

What a point is, think of it like prepaid interest.

Kyle Seagraves: 00:23:39

So most people think that a loan officer is going to give them one interest rate.

Kyle Seagraves: 00:23:43

So for example, let's use 5%.

Kyle Seagraves: 00:23:47

They go to a loan officer and the, the loan officer says, I'll give you

Kyle Seagraves: 00:23:49

a mortgage and we'll be able to give you a 5%, uh, that that's gonna be what

Kyle Seagraves: 00:23:53

you're gonna be paying on your debt.

Kyle Seagraves: 00:23:55

5% interest rate.

Kyle Seagraves: 00:23:56

And most people think that's it, but it actually, you can choose your

Kyle Seagraves: 00:24:00

interest rate, and they have different points or credits associated with it.

Kyle Seagraves: 00:24:04

So 5% might be $0 in.

Kyle Seagraves: 00:24:08

However we could, lower the interest rate to maybe 4.8, seven, 5%.

Kyle Seagraves: 00:24:14

So we're paying slightly less interest, but upfront it may cost

Kyle Seagraves: 00:24:18

us, uh, let's say one point, which would be 1% of the loan amount.

Kyle Seagraves: 00:24:23

So if we had a $400,000 loan, we might pay $4,000 up front to lower our interest

Kyle Seagraves: 00:24:28

rate and we can actually do the reverse.

Kyle Seagraves: 00:24:30

We can actually increase the interest rate and receive a credit back.

Kyle Seagraves: 00:24:34

A lot of people don't talk about credits,

Kyle Seagraves: 00:24:35

but that's what would be.

Katelyn Magnuson: 00:24:36

of.

Kyle Seagraves: 00:24:37

We could get like a lender credit.

Kyle Seagraves: 00:24:39

Um, and actually this is what I recommend for a lot of people who are

Kyle Seagraves: 00:24:42

getting something like an FHA loan who have a lower credit score who

Kyle Seagraves: 00:24:45

are going to refinance in the future.

Kyle Seagraves: 00:24:47

We can actually take advantage of the fact that they're not gonna be paying a high

Kyle Seagraves: 00:24:51

interest rate over a long period of time.

Kyle Seagraves: 00:24:53

So I'll say let's use the bank's money against them.

Kyle Seagraves: 00:24:55

Let's take a higher interest rate, give you a credit for closing costs.

Kyle Seagraves: 00:24:59

And since you're gonna refinance, uh, in two years, you're not

Kyle Seagraves: 00:25:03

going to pay more in interest.

Kyle Seagraves: 00:25:05

Then the credit that they gave you.

Kyle Seagraves: 00:25:08

So we took advantage of their money over a short period of time and used that.

Kyle Seagraves: 00:25:11

Then we can do the opposite too.

Kyle Seagraves: 00:25:12

We can say, well, could I pay more money up front to save

Kyle Seagraves: 00:25:18

interest over a period of time?

Kyle Seagraves: 00:25:20

And we can do that through points, all it's all as a

Kyle Seagraves: 00:25:22

percentage of the loan amount.

Kyle Seagraves: 00:25:23

So one point is 1%, two points, 2% of the loan amount.

Kyle Seagraves: 00:25:27

and so then what we're looking at is what's the break even period between us.

Kyle Seagraves: 00:25:31

Paying the money up front versus the money that we save in interest

Kyle Seagraves: 00:25:36

over the term of the loan.

Kyle Seagraves: 00:25:37

A lot of people do this wrong.

Kyle Seagraves: 00:25:38

They will just look at the general monthly payment, but you only wanna look at the

Kyle Seagraves: 00:25:42

interest payment to see the savings here.

Kyle Seagraves: 00:25:46

and people also make the mistake of not comparing it against, let's say we

Kyle Seagraves: 00:25:49

paid $4,000 up front in the interest rate versus adding $4,000 to the down.

Kyle Seagraves: 00:25:57

So usually what ends up happening is the break even point ends up being

Kyle Seagraves: 00:26:02

on average around six to seven years.

Kyle Seagraves: 00:26:06

On average, though, people refinance their loan within a six year period

Kyle Seagraves: 00:26:10

because interest rates tend to drop down below what they, initially had.

Kyle Seagraves: 00:26:16

And so the problem here is if we pay points, especially a lot of

Kyle Seagraves: 00:26:19

points, just to feel good about the interest rate we got up.

Kyle Seagraves: 00:26:23

Statistically, what ends up happening is people will refinance before

Kyle Seagraves: 00:26:27

they actually broke even on the investment that they made up front.

Kyle Seagraves: 00:26:30

So they actually lost money over a period of time.

Kyle Seagraves: 00:26:33

And so, unfortunately, I see a lot of people who pay points only

Kyle Seagraves: 00:26:37

because they want the emotional connection of a lower interest rate.

Kyle Seagraves: 00:26:41

And this is where, you know, we talked about, I think this is the first episode.

Kyle Seagraves: 00:26:43

It was like, just don't talk about numbers with people.

Kyle Seagraves: 00:26:47

because we, it starts to just put us in a bad head space.

Kyle Seagraves: 00:26:49

We start doing things performatively for other people to say like, oh, I got a

Kyle Seagraves: 00:26:53

3.9, 9% interest rate just to feel better.

Kyle Seagraves: 00:26:56

It's like, you really

Katelyn Magnuson: 00:26:57

up with the Joneses, but interest were,

Kyle Seagraves: 00:26:58

Yeah.

Kyle Seagraves: 00:26:59

Yeah.

Kyle Seagraves: 00:26:59

But you paid thousands of dollars to like stunt on your

Kyle Seagraves: 00:27:02

friends, like who, who cares?

Kyle Seagraves: 00:27:04

So I think paying up to one point is fine beyond that.

Kyle Seagraves: 00:27:10

I think you really need to start running a lot of D.

Kyle Seagraves: 00:27:12

financial scenarios over a period of time to see which one is better.

Kyle Seagraves: 00:27:16

Um, and the loan clarity advisor calculator have does do that.

Kyle Seagraves: 00:27:19

You can actually compare, mix and match different scenarios

Kyle Seagraves: 00:27:22

and see which one's better.

Kyle Seagraves: 00:27:23

But under a point, I think you're fine, uh, to do so more than that,

Kyle Seagraves: 00:27:29

we really wanna make sure that the break even period makes sense for

Kyle Seagraves: 00:27:32

how long you're gonna be in the home.

Kyle Seagraves: 00:27:34

And that you're really confident.

Kyle Seagraves: 00:27:35

You're not gonna refinance before then.

Kyle Seagraves: 00:27:36

It's not the end of the world.

Kyle Seagraves: 00:27:37

If you do, you.

Kyle Seagraves: 00:27:39

Will likely end up having a net cost that those points didn't

Kyle Seagraves: 00:27:43

do anything for you, over

Katelyn Magnuson: 00:27:46

No, that makes total sense.

Katelyn Magnuson: 00:27:47

And I think that that's something I know when I was buying my first

Katelyn Magnuson: 00:27:50

home, uh, my loan officer at the time had sort of advised me as he was

Katelyn Magnuson: 00:27:53

walking me through the whole process that the loan that we went with.

Katelyn Magnuson: 00:27:58

It wasn't my favorite at the time, it was an FHA arm way back in the day,

Kyle Seagraves: 00:28:01

longer period of

Katelyn Magnuson: 00:28:02

to be able to get us to a certain loan amount that I was looking

Katelyn Magnuson: 00:28:05

for, because I was a 20 year old kid.

Katelyn Magnuson: 00:28:06

I had a really, really small budget and that dropped her a payment

Katelyn Magnuson: 00:28:09

by a hundred dollars a month.

Katelyn Magnuson: 00:28:10

And there were some, you know, really strict.

Katelyn Magnuson: 00:28:12

Parameters around, you know, how much it could go up by.

Katelyn Magnuson: 00:28:15

And he, you know, advised me.

Katelyn Magnuson: 00:28:17

He's like most people will refinance within the first five or six years.

Katelyn Magnuson: 00:28:20

Anyways.

Katelyn Magnuson: 00:28:21

He's like, that gives you time to build your career up, to build your income up.

Katelyn Magnuson: 00:28:23

He's like, you may decide you want to move.

Katelyn Magnuson: 00:28:25

And then in that time, your rate wouldn't have gone.

Katelyn Magnuson: 00:28:29

I think when we looked at it, it.

Katelyn Magnuson: 00:28:30

The chances, it would've potentially gone up above what the fixed rates were

Katelyn Magnuson: 00:28:33

at that time, I think in year four.

Katelyn Magnuson: 00:28:36

So there was potentially a one year opportunity cost.

Katelyn Magnuson: 00:28:39

But in that time I was also saving 150 or a hundred dollars a month

Katelyn Magnuson: 00:28:42

on my payment, which for me was really a make or break at the time.

Katelyn Magnuson: 00:28:45

And I think helped me make the decision to stop renting, cuz I hated living in an

Kyle Seagraves: 00:28:51

Mm-hmm

Katelyn Magnuson: 00:28:52

And I think that that's something that everyone

Katelyn Magnuson: 00:28:54

is like, oh, I wanna buy a house.

Katelyn Magnuson: 00:28:55

You.

Katelyn Magnuson: 00:28:56

Renting is throwing my money away.

Katelyn Magnuson: 00:28:57

And, you know, with the house I can build equity and everything else.

Katelyn Magnuson: 00:29:00

And I know you and I were chatting about this the other day, but I wanna

Katelyn Magnuson: 00:29:04

talk about, you know, the comparison financially between renting versus owning

Katelyn Magnuson: 00:29:08

and when that makes sense for someone.

Kyle Seagraves: 00:29:11

Yes.

Kyle Seagraves: 00:29:12

I do wanna throw in one thing really quickly that, uh, you jogged my

Kyle Seagraves: 00:29:15

mind about with points is that.

Kyle Seagraves: 00:29:19

A really quality loan officer is not going to give you an option

Kyle Seagraves: 00:29:22

with a ton of points added to it.

Kyle Seagraves: 00:29:24

Really salesy loan officers, uh, the ones that aren't gonna

Kyle Seagraves: 00:29:29

be the best ones to work with.

Kyle Seagraves: 00:29:30

And a company that does this a lot.

Kyle Seagraves: 00:29:31

Is that a company I won't mention, but they're the one

Kyle Seagraves: 00:29:34

that has like the spaceship.

Kyle Seagraves: 00:29:35

You can kind of put that together.

Kyle Seagraves: 00:29:37

They will, if the average rate right now is 5%, they'll go throw multiple points.

Kyle Seagraves: 00:29:45

I've seen loan estimates with 12,000, 20,000, $30,000 worth of points, just

Kyle Seagraves: 00:29:52

so they can have a lower interest rate.

Kyle Seagraves: 00:29:54

And they use that as a pitch because they know their interest rate

Kyle Seagraves: 00:29:56

is higher than everyone else's.

Kyle Seagraves: 00:29:58

So they'll be like, we can get you a 3.99.

Kyle Seagraves: 00:30:01

Okay.

Kyle Seagraves: 00:30:02

But it's gonna cost you $25,000 up front.

Kyle Seagraves: 00:30:04

That actually doesn't make sense financially.

Kyle Seagraves: 00:30:07

but that's just something to be aware of when you are shopping, uh, for lenders.

Kyle Seagraves: 00:30:11

So.

Kyle Seagraves: 00:30:13

With renting versus buying.

Kyle Seagraves: 00:30:15

I really think that, buying is just almost always a better financial decision.

Kyle Seagraves: 00:30:21

I don't like the like renting is throwing money away thing.

Kyle Seagraves: 00:30:24

cuz like I'm not a huge fan of everything Dave Ramsey says, but he has a couple

Kyle Seagraves: 00:30:27

little things I like where he says like renting is buying patients.

Kyle Seagraves: 00:30:31

I think for a lot of people, it's very true.

Kyle Seagraves: 00:30:33

Like you might not be in a financial position where

Kyle Seagraves: 00:30:35

buying makes sense right now.

Kyle Seagraves: 00:30:37

Primarily if you don't have a lot of, uh, upfront cash, if you're kind of

Kyle Seagraves: 00:30:41

really strapped for cash, um, and aren't able to build up even emergency fund,

Kyle Seagraves: 00:30:46

buying may not be a good decision because you're going to have to pay for anything

Kyle Seagraves: 00:30:50

out of pocket, where renting may better to help you build up that savings.

Kyle Seagraves: 00:30:54

However, when you are in that position where your income is stable, you

Kyle Seagraves: 00:30:58

have savings available as well, and you feel a little more, comfortable

Kyle Seagraves: 00:31:03

in the location that you're at with saying, I really like this area.

Kyle Seagraves: 00:31:06

I feel confident in like the growth of this area.

Kyle Seagraves: 00:31:09

Then I think buying is a really good decision.

Kyle Seagraves: 00:31:12

Um, Because it's almost always financially better because you are building equity

Kyle Seagraves: 00:31:17

in the home with your payments and you're building appreciation in the home as well.

Kyle Seagraves: 00:31:21

Um, I think renting can be really good again, like if you have some, uh, things

Kyle Seagraves: 00:31:26

that don't feel as stable financially, and then also if you're new to an area, um,

Kyle Seagraves: 00:31:31

I know a lot of people they'll, they'll move across, uh, you know, they'll move

Kyle Seagraves: 00:31:34

to a different state for a job, or even just like maybe an hour or two away for

Kyle Seagraves: 00:31:38

a job and they immediately wanna buy.

Kyle Seagraves: 00:31:40

And I think it's so much better to rent.

Kyle Seagraves: 00:31:42

Get comfortable with what neighborhoods feel like?

Kyle Seagraves: 00:31:45

Where, where do you like living?

Kyle Seagraves: 00:31:46

What neighborhoods you like, before you end up buying, otherwise you're

Kyle Seagraves: 00:31:49

going in blind to a neighborhood and since real estate is so, dependent on

Kyle Seagraves: 00:31:53

location, like even just a neighborhood by neighborhood, you don't wanna buy

Kyle Seagraves: 00:31:57

into a neighborhood that you have no idea how it works, or you only heard about

Kyle Seagraves: 00:32:01

the neighborhood and didn't experience the neighborhood before you bought into.

Katelyn Magnuson: 00:32:06

Absolutely.

Katelyn Magnuson: 00:32:06

No, I, I think that that's really important.

Katelyn Magnuson: 00:32:08

And I think that again, depending on your personal financial situation,

Katelyn Magnuson: 00:32:11

your personal goals and what's going on in your life that I don't, I don't,

Katelyn Magnuson: 00:32:15

I really don't think that renting is.

Katelyn Magnuson: 00:32:17

assuming that it aligns with what you're trying to do in your life.

Katelyn Magnuson: 00:32:20

I mean, I

Kyle Seagraves: 00:32:21

yeah.

Katelyn Magnuson: 00:32:21

would've actually rented when we made this last move,

Katelyn Magnuson: 00:32:23

but there wasn't anything where I could have three cats and three

Katelyn Magnuson: 00:32:26

dogs and, you know, 10 chickens.

Katelyn Magnuson: 00:32:28

So buying it was,

Katelyn Magnuson: 00:32:30

and we were able to do a scouting trip ahead of time

Katelyn Magnuson: 00:32:32

and, you know, do what we could.

Katelyn Magnuson: 00:32:33

And there's been a learning curve with that.

Katelyn Magnuson: 00:32:34

I mean, had I been able to renting, would've been much more ideal

Katelyn Magnuson: 00:32:38

and I think that when people can.

Katelyn Magnuson: 00:32:40

Like you said, if they're moving to a new area, if they're needing time to

Katelyn Magnuson: 00:32:43

build up an emergency fund, because if you don't have an emergency fund

Katelyn Magnuson: 00:32:46

and you buy a house, that means that you're gonna be so much more stressed.

Katelyn Magnuson: 00:32:50

You're going to have any, you know, repairs potentially that

Katelyn Magnuson: 00:32:53

you're having to either fund out of pocket or with credit card debt.

Katelyn Magnuson: 00:32:56

And that's not a stress free to be jumping into, you know, potentially

Katelyn Magnuson: 00:33:02

the biggest investment that you make in your life with buying a house.

Katelyn Magnuson: 00:33:05

And so I.

Katelyn Magnuson: 00:33:06

Understanding that and making sure that you're making it for the right reasons.

Katelyn Magnuson: 00:33:08

And again, not talking about it with people around you until you've made up

Katelyn Magnuson: 00:33:12

your own mind, or maybe having talked with a professional first to decide what's best

Katelyn Magnuson: 00:33:16

for you financially and what you can do.

Katelyn Magnuson: 00:33:18

I think we're moving away from this to an extent, but I think for so

Katelyn Magnuson: 00:33:22

long success has been measured by getting married and buying a house.

Katelyn Magnuson: 00:33:26

And, you know, you've, you've thrived, you've gone out on your own and a that's

Katelyn Magnuson: 00:33:31

not accessible for everyone right now.

Katelyn Magnuson: 00:33:34

And it's also not what everyone's looking for.

Katelyn Magnuson: 00:33:36

You know, maybe you want a digital nomad and travel the world.

Katelyn Magnuson: 00:33:39

Does buying make sense for you?

Katelyn Magnuson: 00:33:40

Can you rent that out?

Katelyn Magnuson: 00:33:41

You know, there are all these different scenarios to run

Katelyn Magnuson: 00:33:43

through to decide what makes the

Kyle Seagraves: 00:33:45

Yeah.

Kyle Seagraves: 00:33:46

Yeah.

Kyle Seagraves: 00:33:47

I know a CEO of a very large mortgage company who just rents To be fair.

Kyle Seagraves: 00:33:54

He has several rentals all over the nation that he just travels between,

Kyle Seagraves: 00:33:59

but that makes more sense to him.

Kyle Seagraves: 00:34:01

And he has the income that supports him being able to kind of do whatever

Kyle Seagraves: 00:34:05

he wants with his housing situation.

Kyle Seagraves: 00:34:08

but it is not the pinnacle of success.

Kyle Seagraves: 00:34:10

The ultimate thing that you have to do.

Kyle Seagraves: 00:34:12

do you feel like there is a timeline that people need to have in mind

Kyle Seagraves: 00:34:15

of like, they need to be in a home for a specific amount of time.

Kyle Seagraves: 00:34:18

If they're going to make a buying decision.

Kyle Seagraves: 00:34:20

Like if they're like, oh, I'm not really sure if I'm gonna continue living

Kyle Seagraves: 00:34:22

here for the next three to five years.

Kyle Seagraves: 00:34:24

Do you think renting is better in that situation?

Katelyn Magnuson: 00:34:26

I feel like if you think you're gonna be

Katelyn Magnuson: 00:34:28

somewhere for five years or more.

Katelyn Magnuson: 00:34:30

depending on the market prices, you know, rent versus everything else.

Katelyn Magnuson: 00:34:33

I think five years is kind of the break even point from what I've

Katelyn Magnuson: 00:34:35

looked at for it being justified.

Katelyn Magnuson: 00:34:40

And I mean, home, buying's a process.

Katelyn Magnuson: 00:34:41

There are, there are pros to renting, right?

Katelyn Magnuson: 00:34:44

You have things that aren't your responsibility.

Katelyn Magnuson: 00:34:45

You potentially have a landlord or a property management company that can be

Katelyn Magnuson: 00:34:48

great and can handle some things for you.

Katelyn Magnuson: 00:34:50

And so I think for the most part, yeah, the, the three to five year.

Katelyn Magnuson: 00:34:54

I personally, I think would get really antsy by the three year

Katelyn Magnuson: 00:34:57

mark if I was renting somewhere and would absolutely want to buy.

Katelyn Magnuson: 00:35:00

But I think if you're not sure you're going to stay in an area for at least

Katelyn Magnuson: 00:35:05

three, if not five, that I wouldn't necessarily look to buy again, unless

Katelyn Magnuson: 00:35:10

it made really great financial sense.

Katelyn Magnuson: 00:35:11

Or is it something that would make a great rental later on?

Katelyn Magnuson: 00:35:15

You know, is it in a college town?

Katelyn Magnuson: 00:35:16

Is it somewhere that's in demand where even if you weren't going to be staying

Katelyn Magnuson: 00:35:20

there that full time could still pay off.

Kyle Seagraves: 00:35:22

Yeah, absolutely.

Kyle Seagraves: 00:35:23

I still haven't made up my mind on like the three to five year, but it's somewhere

Kyle Seagraves: 00:35:26

within there that I'm like it's after three years definitely feels right.

Kyle Seagraves: 00:35:31

But it's so hard to tell, like there's what, what is the actual break even point?

Kyle Seagraves: 00:35:35

I think it just depends too a lot on like, the difference in your rental payment

Kyle Seagraves: 00:35:38

versus your mortgage payment, because, for a lot of people, their rent is lower

Kyle Seagraves: 00:35:42

than their mortgage payment might be.

Kyle Seagraves: 00:35:44

And for others, it's the opposite.

Kyle Seagraves: 00:35:46

Their rental payment is a lot higher than their potential mortgage could be.

Kyle Seagraves: 00:35:49

Um, and it really, I think comes down to those personal situations.

Kyle Seagraves: 00:35:52

But I think, yeah, three to five years, as long as you're not in a position

Kyle Seagraves: 00:35:55

where you're like I could move out of state tomorrow or next year, then.

Kyle Seagraves: 00:36:01

Getting to that point of figuring out.

Kyle Seagraves: 00:36:02

Okay.

Kyle Seagraves: 00:36:03

I think I wanna work towards buying a house, uh, within the three to five

Kyle Seagraves: 00:36:06

year range is a really good decision.

Katelyn Magnuson: 00:36:08

Well, I think too, what you just touched on is, especially

Katelyn Magnuson: 00:36:11

if you are able to buy and it's significantly less expensive then for

Katelyn Magnuson: 00:36:15

you to rent depending on, you know, what

Katelyn Magnuson: 00:36:16

the area is that that can also lend to you, maybe making the jump sooner.

Katelyn Magnuson: 00:36:20

And on the flip side, if you can rent, you know, less expensively,

Katelyn Magnuson: 00:36:23

then you can buy and you're unsure of how long you're gonna be somewhere.

Katelyn Magnuson: 00:36:27

Is there as much financial incentive

Kyle Seagraves: 00:36:29

Yeah, absolutely.

Katelyn Magnuson: 00:36:31

I think you had a really interesting take on this and

Katelyn Magnuson: 00:36:32

we were talking about this offline.

Katelyn Magnuson: 00:36:34

So sometimes people will look at renting as throwing money away, which

Katelyn Magnuson: 00:36:38

I think you and I both disagree with in the vast majority of situations.

Katelyn Magnuson: 00:36:41

However, when you look at renting is throwing money away and you look at

Katelyn Magnuson: 00:36:46

having a mortgage or buying a home as not throwing money away, you had kind

Katelyn Magnuson: 00:36:50

of brought up that the opportunity cost of both of them and that you're

Katelyn Magnuson: 00:36:54

looking to decrease your overall cost.

Katelyn Magnuson: 00:36:56

So essentially you were talking about how you're looking to decrease

Katelyn Magnuson: 00:37:00

your overall out of pocket expense.

Katelyn Magnuson: 00:37:02

And when you buy a house, let's say that you rent for 10 years or you buy a

Katelyn Magnuson: 00:37:06

house and you live there for 10 years.

Katelyn Magnuson: 00:37:08

What is your cost at the end of that timeframe and

Katelyn Magnuson: 00:37:10

comparing those.

Kyle Seagraves: 00:37:12

Um, Yeah, so a lot of people.

Kyle Seagraves: 00:37:13

For some reason well I know the reason cuz everyone wants to talk about the

Kyle Seagraves: 00:37:16

good things in finance that happen to them and never wanna talk about the bad.

Kyle Seagraves: 00:37:20

Especially with the way the housing work has moved over the past 10 years.

Kyle Seagraves: 00:37:24

There's this thought that when you buy a home, it has to be profitable

Kyle Seagraves: 00:37:28

and people start treating housing, like where I'm going to enjoy spending

Kyle Seagraves: 00:37:32

my time and where my cat is going to Meow all around the house like that.

Kyle Seagraves: 00:37:37

That is supposed to be an investment.

Kyle Seagraves: 00:37:39

. And so I think people view when they buy a house that it has

Kyle Seagraves: 00:37:42

to be, I have to make money.

Kyle Seagraves: 00:37:44

and really for most people home actually still costs the money, even

Kyle Seagraves: 00:37:50

over a period of 10 to 15 years.

Kyle Seagraves: 00:37:52

the only thing that's better over buying a house than renting is not the fact

Kyle Seagraves: 00:37:56

that you make money buying a house.

Kyle Seagraves: 00:37:59

It's that it's so much cheaper than renting over that same period of time.

Kyle Seagraves: 00:38:05

The main reason why is because the monthly payment that you're paying in part of

Kyle Seagraves: 00:38:09

that goes towards your equity in the home.

Kyle Seagraves: 00:38:11

So how much money you could get if you sold, and then also your

Kyle Seagraves: 00:38:14

home grows in appreciation.

Kyle Seagraves: 00:38:16

Whereas a rental payment usually increases over time, historically a

Kyle Seagraves: 00:38:20

three year percent increase over time.

Kyle Seagraves: 00:38:23

And none of that goes towards you.

Kyle Seagraves: 00:38:25

And so when you actually look at the cost of a loan and then the potential

Kyle Seagraves: 00:38:28

cost of repairs, along with the cost of things like property taxes and

Kyle Seagraves: 00:38:31

homeowner's insurance, buying home even over 10 years, usually you have a net

Kyle Seagraves: 00:38:36

loss, considering everything appreciation cost of the loan taxes insurance.

Kyle Seagraves: 00:38:41

you usually actually lose money, but you lose less money than if you were

Kyle Seagraves: 00:38:44

renting over the same period of time.

Kyle Seagraves: 00:38:46

And when I run these calculations through, the loan comparison software

Kyle Seagraves: 00:38:50

that I have most people, that difference is actually around $150,000.

Kyle Seagraves: 00:38:54

So we're buying is $150,000, better decision than renting.

Kyle Seagraves: 00:39:00

Over that 10 to 15 year period.

Kyle Seagraves: 00:39:02

so you're still losing money buying.

Kyle Seagraves: 00:39:05

Maybe you lost on average, like $10,000 over 10 years, but renting, you may

Kyle Seagraves: 00:39:10

have lost a hundred thousand dollars over 10 years, uh, because you were

Kyle Seagraves: 00:39:15

never able to get that money back.

Kyle Seagraves: 00:39:16

So that's really the big thing.

Kyle Seagraves: 00:39:19

There are instances in where people actually make money buying house.

Kyle Seagraves: 00:39:21

If they have crazy appreciation that they're seeing, but it's not the.

Kyle Seagraves: 00:39:27

People are way more willing to share.

Kyle Seagraves: 00:39:29

Uh, it's the survivorship bias.

Kyle Seagraves: 00:39:31

People are way more willing to share.

Kyle Seagraves: 00:39:33

Hey, I made $20,000 by selling my house than I took a bath on my house.

Kyle Seagraves: 00:39:40

right.

Kyle Seagraves: 00:39:40

No one wants to share those stories.

Katelyn Magnuson: 00:39:42

Right.

Katelyn Magnuson: 00:39:43

Well, I think that was just such an interesting tape because I think so

Katelyn Magnuson: 00:39:46

many of us are looking at it yes.

Katelyn Magnuson: 00:39:47

As an investment, but it's, it's an it's investing in decreasing

Katelyn Magnuson: 00:39:51

our costs for most of us at the end

Katelyn Magnuson: 00:39:53

of the day,

Kyle Seagraves: 00:39:54

Yeah.

Katelyn Magnuson: 00:39:54

which I think is a

Katelyn Magnuson: 00:39:55

really powerful takeaway.

Kyle Seagraves: 00:39:57

And when people get a check when they sell their home.

Kyle Seagraves: 00:39:59

And like that calculation that I use in the, loan comparison software, I have

Kyle Seagraves: 00:40:02

considers the cost to sell that you pay for like realtors commission around 6%.

Kyle Seagraves: 00:40:07

Like when people get a check back at closing, when they sell their

Kyle Seagraves: 00:40:09

home over, let's say 10 years.

Kyle Seagraves: 00:40:11

most of the time people are gonna get money and they be like, look,

Kyle Seagraves: 00:40:13

I made money, owning a home.

Kyle Seagraves: 00:40:16

When in reality, if we looked at all the numbers broken down, they

Kyle Seagraves: 00:40:20

actually lost money over that time.

Kyle Seagraves: 00:40:22

The money that they're getting back is the equity that they paid into the home.

Kyle Seagraves: 00:40:27

And so they're getting it back so they didn't actually make money.

Kyle Seagraves: 00:40:29

Even though you got a check, it was your money to begin with.

Kyle Seagraves: 00:40:32

You still may have lost a little bit of money over a period of time, but you

Kyle Seagraves: 00:40:35

would've lost way more, through renting.

Katelyn Magnuson: 00:40:38

Absolutely.

Katelyn Magnuson: 00:40:39

No, I, I do.

Katelyn Magnuson: 00:40:39

I think so many people focus on that last, the, oh, look, I got this.

Katelyn Magnuson: 00:40:43

I get to walk away with the profit and then yeah.

Katelyn Magnuson: 00:40:45

But what did you pay for repairs

Katelyn Magnuson: 00:40:47

and maintenance and.

Kyle Seagraves: 00:40:48

it's cause no, one's like seeing how much they actually paid in.

Katelyn Magnuson: 00:40:52

Yes.

Katelyn Magnuson: 00:40:53

Yeah.

Katelyn Magnuson: 00:40:53

You're like, okay.

Katelyn Magnuson: 00:40:53

Let's do just a little bit of math here for a second, cuz that's great.

Katelyn Magnuson: 00:40:56

And I'm not trying to, you know, shit on your parade, but we,

Katelyn Magnuson: 00:41:00

we have to factor it all in.

Katelyn Magnuson: 00:41:01

no, I, I think that that's a really good way to look at it, Kyle, and I think that

Katelyn Magnuson: 00:41:04

that was a really unique perspective.

Katelyn Magnuson: 00:41:06

is there anything else?

Katelyn Magnuson: 00:41:07

Oh, did you wanna chat about the standard deduction?

Kyle Seagraves: 00:41:10

Yeah, I think we can cover that a little bit.

Kyle Seagraves: 00:41:12

and you might be able to shed a little bit more light on that

Kyle Seagraves: 00:41:15

since that is definitely more your domain than it is mine.

Kyle Seagraves: 00:41:18

But I do know, um, I think a lot of people get confused when they

Kyle Seagraves: 00:41:22

talk with me and they're like, oh, I can just write everything off.

Kyle Seagraves: 00:41:25

Right.

Kyle Seagraves: 00:41:25

I'm

Kyle Seagraves: 00:41:25

like, well,

Katelyn Magnuson: 00:41:26

that

Kyle Seagraves: 00:41:26

You could, but you're gonna save more money

Kyle Seagraves: 00:41:29

taking the standard deduction.

Kyle Seagraves: 00:41:31

At least most people will than by itemizing, things

Kyle Seagraves: 00:41:34

like their mortgage interest.

Kyle Seagraves: 00:41:36

So could you maybe

Kyle Seagraves: 00:41:36

share a little bit more about some of

Kyle Seagraves: 00:41:38

those

Kyle Seagraves: 00:41:38

differences?

Katelyn Magnuson: 00:41:39

Yeah, absolutely.

Katelyn Magnuson: 00:41:40

So from a tax perspective, and this is something that we check for everyone,

Katelyn Magnuson: 00:41:42

that's a homeowner that comes to us.

Katelyn Magnuson: 00:41:45

We look at, is it better to itemize or is it better to take the standard deduction?

Katelyn Magnuson: 00:41:48

And essentially the standard deduction has gone up quite a bit in the last few

Katelyn Magnuson: 00:41:51

years after moving incrementally up.

Katelyn Magnuson: 00:41:53

It is now at $12,950 per person.

Katelyn Magnuson: 00:41:58

So that's double, if you are a, you know, married household and with that, it's

Katelyn Magnuson: 00:42:02

basically a free reduction on income.

Katelyn Magnuson: 00:42:05

So if you are looking at, you know, my spouse and I make a hundred

Katelyn Magnuson: 00:42:08

thousand dollars, and when you get taxed on your income for income

Katelyn Magnuson: 00:42:12

tax purposes, The IRS says, cool.

Katelyn Magnuson: 00:42:15

We know that you have things that are deductions, that you've spent that

Katelyn Magnuson: 00:42:18

are not really part of your take home.

Katelyn Magnuson: 00:42:20

We're gonna give you a free subtraction on your income and you pay taxes after that.

Katelyn Magnuson: 00:42:25

So when you're looking at it and what's 12, 9, 5, 13, little

Katelyn Magnuson: 00:42:29

under it's 25 and some change.

Katelyn Magnuson: 00:42:31

So we're gonna say 26,000 on that a hundred thousand dollars of income.

Katelyn Magnuson: 00:42:35

So that means that you're actually paying income taxes on $74,000.

Katelyn Magnuson: 00:42:40

Instead of the hundred thousand dollars.

Katelyn Magnuson: 00:42:42

So it reduces what you get taxed on and then reduces your tax bill and what a

Katelyn Magnuson: 00:42:47

lot of people will do when they send over all their information for a lot of them,

Katelyn Magnuson: 00:42:51

including their 10 98 from their mortgage, they'll say, oh, you know, I didn't see

Katelyn Magnuson: 00:42:55

where my mortgage was taken on my taxes, where my expenses were taken on there.

Katelyn Magnuson: 00:42:58

You know, my interest, my property taxes.

Katelyn Magnuson: 00:43:01

And that's because for a lot of people, if you are not able to

Katelyn Magnuson: 00:43:05

get up to that standard deduction amount, or exceed it, then it doesn't

Katelyn Magnuson: 00:43:10

justify itemizing those deductions.

Katelyn Magnuson: 00:43:13

Let's say that with your mortgage interest and property taxes, you come up to $6,000.

Katelyn Magnuson: 00:43:19

We could claim we could itemize and claim that $6,000 in your taxes.

Katelyn Magnuson: 00:43:24

But that means you're now being taxed on $94,000 rather than $74,000.

Katelyn Magnuson: 00:43:31

And so it's always worth understanding unless you are purchasing.

Katelyn Magnuson: 00:43:37

A home that has a pretty large mortgage that you're gonna be using for it.

Katelyn Magnuson: 00:43:41

You're most likely, or you have some extenuating circumstances, right?

Katelyn Magnuson: 00:43:44

Maybe you make massive charitable donations or other

Katelyn Magnuson: 00:43:47

things that are going on.

Katelyn Magnuson: 00:43:48

You're not going to hit that standard deduction.

Katelyn Magnuson: 00:43:51

so it's better to take the standard deduction than to

Katelyn Magnuson: 00:43:54

itemize.

Kyle Seagraves: 00:43:55

And that's why like, talking with somebody like

Kyle Seagraves: 00:43:57

yourself is very helpful in, in tax planning, uh, to figure out which

Kyle Seagraves: 00:44:01

one is better, because I think a lot of people get confused about it.

Kyle Seagraves: 00:44:04

Um, or they think like I can, I get to add on writing off my

Kyle Seagraves: 00:44:07

mortgage interest or other things.

Kyle Seagraves: 00:44:10

On top of the standard deduction when it's actually kind of a, a cool

Kyle Seagraves: 00:44:13

thing that the standard deduction got raised so much, um, because for

Kyle Seagraves: 00:44:17

a lot of people, it used to be okay.

Kyle Seagraves: 00:44:19

Either I can write off $6,000 or as a single person, the government would

Kyle Seagraves: 00:44:24

actually say, well, we'll let you write off almost $13,000 for free.

Kyle Seagraves: 00:44:27

If you want to,

Kyle Seagraves: 00:44:29

I'm gonna take that all day long.

Kyle Seagraves: 00:44:31

over taking

Kyle Seagraves: 00:44:32

my itemized.

Katelyn Magnuson: 00:44:33

Yeah.

Katelyn Magnuson: 00:44:33

No, absolutely.

Katelyn Magnuson: 00:44:34

And I, I know I've seen people that have bought a house in the prior tax here and

Katelyn Magnuson: 00:44:37

they come to us and they're like, well, I thought this was gonna help me tax wise.

Katelyn Magnuson: 00:44:40

Yeah.

Katelyn Magnuson: 00:44:41

But we, we never had that conversation.

Katelyn Magnuson: 00:44:42

And like you bought a $300,000 house and the numbers on those, you

Katelyn Magnuson: 00:44:46

know, generally shake out to you being under the standard deduction.

Katelyn Magnuson: 00:44:49

So we're still gonna take the standard deduction and it's better for you.

Katelyn Magnuson: 00:44:53

It just didn't help you on the tax front necessarily.

Kyle Seagraves: 00:44:56

Yeah.

Kyle Seagraves: 00:44:57

Yeah.

Kyle Seagraves: 00:44:57

definitely don't buy a house for the tax, uh, benefits, cuz

Kyle Seagraves: 00:45:01

usually most people don't have

Kyle Seagraves: 00:45:02

zero

Kyle Seagraves: 00:45:02

tax benefits.

Katelyn Magnuson: 00:45:04

it's like having children for the tax benefit, right?

Katelyn Magnuson: 00:45:06

You're like, no, I had kids, I get a tax write up.

Katelyn Magnuson: 00:45:08

I

Kyle Seagraves: 00:45:08

it's the, it's kinda like the same thing with people who like they

Kyle Seagraves: 00:45:12

just started at LLC and then they're like go to a coffee shop and like don't worry.

Kyle Seagraves: 00:45:15

It's a business expense.

Kyle Seagraves: 00:45:16

All right off.

Kyle Seagraves: 00:45:17

I'm like it's still a

Kyle Seagraves: 00:45:18

$7 latte.

Katelyn Magnuson: 00:45:20

right.

Katelyn Magnuson: 00:45:20

You're still spending the money.

Kyle Seagraves: 00:45:22

To stop, help the write off works.

Kyle Seagraves: 00:45:24

Stop free.

Katelyn Magnuson: 00:45:25

Right.

Katelyn Magnuson: 00:45:25

It, it always, um, every single time it brings me back to shits Creek.

Katelyn Magnuson: 00:45:30

You know, it's a write off, it's a write off.

Katelyn Magnuson: 00:45:32

Well, who pays for it?

Katelyn Magnuson: 00:45:33

I don't know the government people.

Katelyn Magnuson: 00:45:35

Um, because yeah, I, I think if you don't fully understand, write offs

Katelyn Magnuson: 00:45:38

and how they work, like you're still spending that money out of pocket.

Katelyn Magnuson: 00:45:41

It's just that if it's a business deduction, you're, you know, potentially.

Katelyn Magnuson: 00:45:44

Getting a portion of that back or paying a portion of it, you know,

Katelyn Magnuson: 00:45:47

less, but you're not, if you spend $7, you're not paying $7 less in taxes.

Katelyn Magnuson: 00:45:52

Like it's a ratio or a percentage,

Katelyn Magnuson: 00:45:53

not

Kyle Seagraves: 00:45:54

Yeah.

Kyle Seagraves: 00:45:54

80% of a $7 coffee is still

Kyle Seagraves: 00:45:57

what?

Kyle Seagraves: 00:45:58

Six something

Kyle Seagraves: 00:46:00

you're still

Kyle Seagraves: 00:46:00

spending the

Katelyn Magnuson: 00:46:00

Yeah.

Katelyn Magnuson: 00:46:01

Five 60, I think.

Katelyn Magnuson: 00:46:02

Yeah.

Katelyn Magnuson: 00:46:02

Yeah,

Kyle Seagraves: 00:46:02

yeah,

Katelyn Magnuson: 00:46:04

So you're still, you're still out the money that like you could

Katelyn Magnuson: 00:46:06

have just kept in your pocket and paid the

Katelyn Magnuson: 00:46:08

20% taxes on.

Katelyn Magnuson: 00:46:10

So.

Katelyn Magnuson: 00:46:10

Oh, well, thank you.

Katelyn Magnuson: 00:46:12

I think on our next episode, we're gonna be diving a little

Katelyn Magnuson: 00:46:15

bit more into self-employment.

Katelyn Magnuson: 00:46:16

So that was actually a perfect segue and chatting about the strategy around

Katelyn Magnuson: 00:46:20

buying a house and risk management.

Katelyn Magnuson: 00:46:22

So we'll catch everyone next week.

Katelyn Magnuson: 00:46:24

Make sure if you want to check out Kyle's calculator or any of the

Katelyn Magnuson: 00:46:28

social media, you check the notes.