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You can also access more articles and more information
on my new real estate blog
www.WhenYoureReady.wordpress.com
Whether you are looking for more space to raise a family or the personal investment,
there are many advantages to owning your own home, ranging from the purely
personal to the very practical.
For many people, the motivation for home ownership is primarily financial.
Owning your own home is a first-rate investment for a number of reasons: 1. Scheduled Savings When you buy a house, your monthly mortgage payments serve as a type of scheduled savings plan. Over time you gradually accumulate what lenders call “equity,“ an ownership interest in the property that you can often borrow against or convert into cash by selling the house. In contrast, renters must continue paying rent to a landlord for as long as they rent, without the opportunity to build equity. 2. Stable Housing Costs Another advantage to home ownership is that while rent typically increases year after year, mortgage payments can remain unchanged throughout the entire repayment period. In fact, because of the effect of inflation, over the years you pay the same amount but with devalued dollars. So, what may seem like a substantial payment now will become very affordable after cost-of-living increases. 3. Increased Value Houses typically increase in value, or “appreciate,” over time. It’s not unusual to find a house that sold for $150,000 fifteen years ago to be valued at much more than that amount today. This increased value is as good as money in the bank to the homeowner. 4. Tax Benefits Homeowners also get significant tax breaks that are not available to renters. Most importantly, interest paid on a home mortgage is usually deductible. This factor alone can save you a substantial amount each year in federal income taxes.
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The Rent You Pay...Could Build Equity In Your Own Real Estate!
The following is a comparison of $1,200.00 per month in rent vs. a $200,000.00 purchase,
with a 5% down payment, an annual gross income of $60,000 per year, filing married joint,
for a period of 5 years. Assumptions used in this calculation: Annual inflation rate = 3% Annual property appreciation rate = 4% Annual rental increase = 5% Alternative investment rate = 6% Annual property tax rate = 1.5% of the purchase price Annual hazard insurance = .325 of the purchase price Annual cost of general maintenance and repairs = 1% of the purchase price
SHORT TERM - MONTHLY SAVINGS
Rent $1,200 Monthly Payment $0 Average tax savings $1,200 After-tax monthly payment Buy $1,528 Monthly Payment $403 Average tax savings $1,125 After-tax monthly payment LONG TERM - TIME IN THE HOUSE Total cost over the next 5 years Rent $88,627
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RENT ACCUMULATION CHART
Per Month
$700.00 $750.00 $800.00 $850.00 $900.00 $1,000.00 $1,100.00 $1,200.00 $1,300.00 $1,400.00
$1,500.00 $1,600.00 $1,700.00
Money Spent After Paying Rent for 10 Years
$143,391.00 $153,634.00 $163,876.00 $174,118.00 $184,360.00 $194,603.00
$225,329.00 $245,814.00
$266,298.00 $286,783.00 $307,267.00 $327,752.00 $348,236.00
Money Spent After Paying Rent 15 Years
$290,129.00 $310,853.00 $331,576.00 $352,280.00 $373,023.00 $393,369.00
$455,917.00 $497,364.00
$538,811.00 $580,259.00 $621,705.00 $663,152.00 $704,599.00
Money Spent After Paying Rent for 20 Years
$531,558.00 $569,527.00 $607,495.00 $645,464.00 $683,432.00 $759,369.00 $835,306.00 $911,242.00 $987,179.00 $1,063,116.00 $1,139,053.00 $1,214,990.00 $1,290,927.00
Money Spent After Paying Rent for 25 Years
$928,783.00 $995,125.00 $1,061,467.00 $1,127,808.00 $1,194,150.00 $1,326,833.00 $1,459,517.00 $1,592,200.00 $1,724,883.00 $1,857,567.00 $1,990,250.00 $2,122,933.00 $2,255,616.00
Money Spent After Paying Rent for 30 Years
$1,582,341.00 $1,695,366.00 $1,808,390.00 $1,921,415.00 $2,034,439.00 $2,260,488.00 $2,486,537.00 $2,712,585.00 $2,938,634.00 $3,164,863.00 $3,390,731.00 $3,616,780.00 $3,842,828.00 Information above deemed reliable but not guaranteed.
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