Terrylynn Fisher, CSP Realtor
Why Rent When You Can Buy?
- National Association of Realtors
Are you unsure about becoming a homeowner?
Thinking that you can’t afford to buy a home?
Are you worried about whether homebuying is a good investment?
Buying a first home can be an intimidating process. Start by 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 emotionally. If you are still struggling with those first decisions, here are some facts that might help you make that first step towards becoming a homeowner.
You can’t afford NOT to buy a home! You Have to Live Somewhere, Right?
Over the last ten years, the cost of rental housing in the US has increased an average of 4% 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 10 years, the total amounht you would pay for rent will equal $137,567!
|
Year
|
Monthly Rent
(avg. increase 3%/year) |
Total Annual Rent
|
|
1
|
$1000
|
$12,000
|
|
2
|
$1,030
|
$12,360
|
|
3
|
$1,061
|
$12,731
|
|
4
|
$1,093
|
$13,113
|
|
5
|
$1,125
|
$13,506
|
|
6
|
$1,159
|
$13,911
|
|
7
|
$1,194
|
$14,329
|
|
8
|
$1,230
|
$14,758
|
|
9
|
$1,267
|
$15,201
|
|
10
|
$1,305
|
$15,657
|
|
Total Rent Paid Over Ten Years
|
$137,567
|
|
Tax Advantages of Owning a Home Result in Savings
None of that $137,567 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% interest. Your monthly payments (not including utilities, maintenance, insurance, etc.) are:
| Monthly Mortgage & Tax Payments | |
| mortgage |
$1,264
|
| property tax (@1.25% tax rate*) |
$230
|
| Total Monthly Payment |
$1,494
|
| tax savings per month (assuming a 30% income tax bracket) | |
| mortgage interest tax deduction |
$322
|
| tax deduction for property tax |
$68
|
| Total Montly Tax Savings |
$390
|
| Total Monthly Cost After Tax Savings |
$1,104
|
*property tax rates vary by city and county
You actually save $390 a month by owning your own home. On a yearly basis, the savings is even more dramatic:
| Total Annual Costs | ||
|
Homeowner
|
Renter
|
|
| annual mortage/rental payment |
$15,168
|
$12,000
|
| real estate taxes |
$2,760
|
0
|
| mortgage interest tax deduction |
$-3,864
|
0
|
| tax deduction for property tax mortgage principal accumulation |
$-816
|
0
|
| appreciation* (if any) |
$-9,450
|
0
|
| Total Annual Cost |
$1,566
|
$12,000
|
| Total Annual Cost with no Appreciation |
$11,016
|
$12,000
|
*based on 4.5% annual appreciation rate, from the NAR Median Sales Price data series
DRE #615420
- Terrylynn Fisher has been a Kirkwood neighbor for over 30 years. Terrylynn has been a Realtor in Contra Costa County for over 32 years. She works with Diablo Realty in Walnut Creek and is consistently a top producer. Terrylynn is a local expert, please contact her for any Real Estate needs, or with a question about the area.
