Saturday 20 Jan 2018

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Unlock Your Future

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Benefits of Home Ownership
1. Build Wealth
 

First of all, your home will appreciate in value and I believe real estate is one of the best investments you will ever make. For example, if you buy a home or condo for $200,000 and it appreciates 5% per year, you will have built up approximately $50,000 equity in 5 years. Also, you need to consider your monetary return on the money you actually invest in the property. Let's say you put 3.5% down and closing costs are approximately $4,000, you would have made $39,000 on a $11,000 investment-what a return! Obviously, there are other costs such as repairs and upkeep that you must subtract from the equation but you get the picture.

2. Tax Deduction


Secondly, the interest and real estate tax portion of your mortgage payment will be tax deductible which will give you a lower after-tax payment. Also, PMI is now tax deductible for new homeowners with adjusted gross income of $100,000 or less. Consult your accountant to determine your tax benefits.

 

Rent Versus Own Example:

Purchase $200,000 single family home with 3.5% down payment or rent $1,200 per month? Assumptions: We will use FHA 30 year fixed program, $196,377 loan amount with 1.75% Financed Mortgage insurance Premium, 5.25% rate (5.38% APR), $3,000 year real estate taxes, $200 association dues, and 28% tax bracket.  

 

Rent

Own

1st mortgage or rent payment

$1,200

$1,084

Real estate taxes

$0

$250

PMI-Private Mortgage Insurance 

$0

$88

Total payment

$1,200

$1,422

Tax savings (Consult an Accountant)

$0

$335

After-tax payment

$1,200

$1,087

If you plan on renting a 1 bedroom condo for $1,200 month you could buy a $200,000 condo with 3.5% down payment and pay a monthy payment of $1,422 but you will save $335 per month on taxes, interest, and PMI so your payment will be $1,087 on an after-tax basis which is $113 lower than renting apartment. Don't you figure out your budget with net  pay not gross pay..right? Get the idea! Also, if you feel the new payment is a little too high, you may want to take less federal taxes out of your paycheck so you can make the monthly payment more affordable since you will be getting a bigger tax deduction at the end of the year. Try some first home buy calculations on your own to see if home ownership is right for you. Finally, don't forget you will be building up wealth through appreciation in value.  
 
3. No place like home
 

Finally, there is nothing like owning your own home. You have to ask yourself why am I paying thousands of dollars in rent. Unless you absolutely have to there is no reason to spend money on something that you will have no ownership in. In most cases when you rent you have no say so in the fixtures, flooring, or even wall colors. Is this what you want, to have a home that isn’t really your home? Lastly the money just doesn’t make sense. In most cases you will more to rent then what the mortgage would cost on the same home. So you spend more then what it will cost to own with no ownership. You need to start somewhere and buying a moderately priced condo or starter home might be your best bet. Stop paying your landlord and start investing in your future today.

 

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