Many people who have never owned a home think it’s too expensive and they can’t afford it. What they don’t know is when you run all the costs involved in owning a home, and take into account the tax advantages, many times they’re paying more to rent than to own. Take for example the spreadsheet below. It shows that to purchase a $130,000 house with 4% down at 5.5% interest rate you would be paying $1,076.62/month and include taxes and insurance. Compare that to paying $1,100/month for rent. And, it shows that after 7 years, you could have $48,464.07 in equity built up in your house (look at the bottom line below). There are varying assumptions in the example below, but it shows that by putting together all the costs involved, you could be saving money by buying. I can run an example for you with your particular information. Give me a call at 817-909-7197 and we can see how it computes for you. Rent vs. Own Purchase Price $130,000.00 Times Appreciation Rate 3% First Year's Appreciation 3,900.00 Monthly Appreciation 25.00 Annual Property Insurance 1,300.00 Percentage - Down Payment 3.5% Mortgage Amount $ 125,450.00 Interest rate 5.50% Term of Mortgage 30 years Monthly Payment 712.29 Unpaid Balance after 1 year 123,760.08 Principal Reduction 1,689.92 Average Monthly Principal Reduction 40.83 Annual Interest (interest only) $6,899.75 Plus Annual Property Taxes 3,000.00 Total Tax Deductible Items 9,899.75 Times Marginal Tax Bracket 25% Total Tax Savings $2,474.94 Monthly Tax Savings 206.24 Monthly Payment (P&I) $712.29 Plus 1/12 Annual Tax and Insurance 358.33 Total Monthly Payment 1,070.62 Less Monthly Tax Savings 206.24 Less Monthly Appreciation 325.00 Less Monthly Principal Reduction 140.83 Net Cost of Owning 398.55 Monthly Rent for Comparison 1,100.00 Less Net Cost of Owning 398.55 Monthly Cost of Renting vs. Owning 701.45 Annual Cost of Renting vs. Owning 8,417.37 Down Payment $4,550.00 Future Equity at End of Seven Years $48,464.07 |