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  Why Rent?

 

According to the National Association of REALTORS in 2009, the cost of rental housing in the U.S. has increased annually on average of 3% per year and will continue. None of the money spent in Rent is returned back to you in the form of savings or tax incentives.

 

Homeownership offers tax advantages over renting and those advantages can help save you money, by returning some of your mortgage payment back to you in the form of tax savings.

 

For most Americans, owning a home is the largest part of their investment portfolio. In an unstable economy with stocks, bonds, and mutual funds in a decline, homes have seen increases in appreciation. The National Association of REALTORS estimates that home values have risen on average of 4.5%* per year, proving homeownership to have a steady return on the investment.

*This percentage could vary from market to market

 

According to the Federal Reserve Board, homeowners enjoy a net worth almost 36 times greater than renters. That net worth is built up by the appreciation gained from your home. The longer you own a home the more valuable it becomes while your debt amount decreases with each monthly payment you make. These will have a direct positive impact in increasing your total net worth every year!

 

The following will illustrate these ideas. *You will need to consider these numbers as rough estimates for illustration purposes only, since I am not an accountant. For more accurate details, please check with your accountant or tax advisor.

                    

                     Rent verses Buying

                                    _______________________________

 

You can't afford not to buy a home!

 

Rental prices over the past ten years throughout the U.S. have increased by an average of 3% a year. In a ten year time period, rental homes or apartments renting for $600 a month will rent for more than $780 a month. If renting the same home for ten years, the total amount of rent paid by you will equal $82,608!!

 

 

Year                                                Monthly Rent                              Total

1                                                              $600                                        $7,200

2                                                                618                                          7,416

3                                                                637                                          7,644

4                                                                656                                          7,872

5                                                                676                                          8,112

6                                                                696                                          8,352

7                                                                717                                          8,604

8                                                                739                                          8,868

9                                                                761                                          9,132

10                                                              784                                          9,408

 

 

Savings Earned from Home Ownership are a Result of Tax Advantages

 

None of the $82,608 total rent paid over the ten year period is retuned to you as savings or as an investment. Owning your own home has tax advantages verses renting that help save you money. Ownership offers you part of your mortgage payment to be returned to you as tax savings. For example: 

 

Your home purchase costs $100,000. Your down payment is $5,000 (plus closing costs – expenses involved in processing the transaction). The balance is financed with a 30 year mortgage at 5.5% interest rate. Your monthly payments (not to include insurance, maintenance, utilities, ect.) are:

*This illustration is based on a 95% loan value. You will need to check with your Mortgage Lender for their requirements for down payments.

 

          Monthly Mortgage & Tax Payments

 

          Mortgage Payment                                                    $539.40

Total Monthly Payment                                                            $597.78       

Tax savings per month (assuming a

25% income tax bracket)

                Mortgage interest tax deduction                              $134.85

                Tax deduction for property tax                                    14.60

Total Monthly cost After Tax Savings                                    $448.33        

(*property taxes vary by city and county)

 

Your estimated savings of $149.45 a month are because you own your home. On a yearly basis your savings can be even more dramatic. Your savings of $149.45 could equal as much as $1,793.40 a year. Over the next 10 years it could be as high $17,934.

 

Owning your home is a good investment

 

Your home will be a large asset and a major part of your investment portfolio. While the stock market has been very unsettled lately, home values are holding steady and showing some moderate increases. According to the National Association of REALTORS, home value estimates have continued to increase by 4.5% per year, proving to be a steady return on your investment.

 

Based on the appreciation estimate of 4.5% per year, a $100,000 home over the next ten years could have an appreciation value of over $150,000.

 

Wealth Building through Homeownership

 

As your home appreciates in value and you pay down your mortgage debt, you are actively building your net worth on a yearly basis. The Federal Reserve Board states that homeownership enjoys 36 times more net worth over renters.

 

*Disclaimer: Since I am not an accountant, you should consider these figures as rough estimates for illustration purposes only. To get more accurate figures, check with your accountant or Tax advisor.