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Why Rent Your Home When You Could Buy? |
| Are you unsure about becoming a HOMEOWNER? Thinking that you can’t afford to BUY a home?
Are you worried about whether home-buying is a good investment?
Buying a first home can be an intimidating process, but the first step is making those first decisions: I want to own my own home; I can afford to own my own home; owning my own home makes sense for me financially and economically. If you are still struggling with those first decisions, here are some facts that may help you make that first step towards becoming a homeowner. |
You cannot afford NOT to buy a home!
Over the last ten years, the cost of rental housing in the U.S. has increased an average of 3% per year. That means that an apartment or home renting for $1,000 per month will cost more than $1,300 a month in ten years. If you rent the same home for ten years, the total amount you would pay for rent will equal $137,640! |
Year |
Monthly Rent
(avg. increase 3% per year) |
Total Annual Return |
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| 1 |
$1,000 |
$12,000 |
| 2 |
1,030 |
12,360 |
| 3 |
1,061 |
12,732 |
| 4 |
1,093 |
13,116 |
| 5 |
1,126 |
13,512 |
| 6 |
1,160 |
13,920 |
| 7 |
1,195 |
14,340 |
| 8 |
1,231 |
14,772 |
| 9 |
1,268 |
15,216 |
| 10 |
1,306 |
15,672 |
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Total Rent Paid Over Ten Years |
$137,640 |
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Tax Advantages of Owning a Home Result in Savings
None of that $137,640 is returned to you, either through savings or as an investment. Homeownership, on the other hand, has tax advantages over renting a home, and those advantages can help you save money. Unlike your monthly rent, part of your monthly mortgage payment “comes back to you” in
tax savings. Here is an example: You purchase a home that costs $210,000. Your downpayment is $10,000 (plus closing costs — expenses incurred to actually process the transaction). You finance the balance with a 30-year fixed rate mortgage at 6.5 percent interest. Your monthly payment
(not including utilities, maintenance, insurance, etc.) are: |
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You actually save $390 a month by owning your own home. On a yearly basis, the savings are even more dramatic: |
Total Annual Costs |
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Homeowner |
Renter |
| annual mortgage/rental payment |
$15,168 |
$12,000 |
| real estate taxes |
2,760 |
0 |
| mortgage interest tax deduction |
-3,864 |
0 |
| tax deduction for property tax |
-816 |
0 |
| mortgage principal accumulation |
-2,232 |
0 |
| appreciation* |
-9,450 |
0 |
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| Total Annual Cost |
$1,566 |
$12,000 |
| *Based on 4.5% annual appreciation rate, from the NATIONAL ASSOCIATION OF REALTORS Median Sales Price data series |
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Homeownership is a Good Investment
For the majority of Americans, their home is their largest financial asset, and a major player in their investment portfolio. It is a good thing, too, since stock market value has declined since 1998, while home price appreciation has increased. The NATIONAL ASSOCIATION OF REALTORS estimates that home value rises, on average, by 4.5 percent a year. That is a steady return on investment; one’s own home is a much less volatile asset than stocks, bonds or mutual funds. |
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