First Home Buyers' Tax Credit: credit or zero interest loan?

It is a zero interest loan, because the tax credit must be repaid. Assuming an interest of 7%, that menas the home owner saves up to $4,200 in interest payments over the 15-year repayment preiod. 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 lax liability in the year it is claimed.