And People Still Trust the Government? Yep... the Stupid Ones Do

From MSN:

The Inspector General for Tax Administration (pdf) reports that of the 1.8 million taxpayers who claimed the [homebuyer] tax credit in 2009, more than 950,000 of them will have to pay back their share of the $12.5 million doled out that calendar year.

Turns out those recipients actually bought their homes in 2008, when the tax credit worked like a no-interest loan worth 10% of your home's purchase price, or up to $7,500. Recipients are required to pay back the loan over 15 years.

This is why you should vote in elections for people who will read what they sign. This is why you should at least do a little research before you scream that something is good. This is why you should really double check ALL of the fine print on a large purchase (not just what is in the contract). This is why you shouldn't use a so-called tax credit as a reason to go into debt.

If you did this, I'll spell out how screwed you are. We'll assume that you bought a $75,000 home with no money down. That is not uncommon with how bad they wanted to sell homes at the time.

You took out a 15-year loan for $75,000 at 6.5% (assuming that you were a responsible borrower who did more math than "how much a month").

For taking out that loan, Uncle Sam gave you a loan of $7,500 at 0% interest. A $7,500 loan at 0% interest sounds great, until you figure up how much it really cost you.

You would end up paying a total of $117,600 for that house. $42,600 would be interest alone.

Additionally, you'll end up paying back each penny of that $7,500 Uncle Sam loaned you.

Now let's say that you took your $653.33 payment and invested it in a mutual fund each month that earned a modest 10% return per year. In 15 years, that $117,600 would have become $274,004.48.

Even if you had put it in a savings account returning as little as 1%, you would have ended up with $127,461. That is STILL more than the $7,500 that Uncle Sam loaned you... that you have to pay back over that 15 years.