RSS Blog FeedBenefits of Home Ownership
Posted at 3:18 AM, Feb. 28, 2007
Tax Advantage:
Depending on what your tax bracket is, you could save between $2,000-$3,000 dollars per year.
Example: Mortgage interest deduction: $120,000 loan @ 6.75%= $8,100 write off
If you fall into the 28% tax bracket, you would receive $2288 (28% of
$8100 back on your returns.
Build Equity:
As you make your monthly mortgage payment, a portion of each payment goes towards paying down the principal.
TIP: If you pay above the amount owed, an extra $50 per payment (and be sure to have it designated towards principal and not interest), you can shave years off your loan. Another option is to do bi-weekly payments. You end up making 13 payments per year instead of twelve, thus, taking off approximately 8 years off your loan and save yourself thousands of dollars in interest.
Appreciation:
Over time your property will appreciate in value. Assuming a modest 4% annual appreciation rate, your $150,000 property will be worth $182,000 in 5 years.
TIP: Worried about saving money for junior’s college education? You could purchase a multi unit property, rent and maintain it, and in about the time college applications are due, you have enough appreciation in this property to sell and pay for college.
Own vs. Rent:
With a mortgage payment of $800/month, your scenario would look like this (assuming 6.75% 30 year fixed rate, $120,000 loan, and annual appreciation of 4%)
After 3 years After 5 years After 10 years
Mortgage Balance $116,000 $112,000 $102,000
Est. Property
Value $168,000 $182,000 $222,000
Return on
Initial Investment $22,000 $39,000 $90,000
With a rental payment of $800/month, you will have paid the following:
(Assuming your management company never raises your rent)
$28,800 over 3 years
$48,000 over 5 years
$96,000 over 10 years
Buy Now vs. Later:
Waiting to “save” more for a down payment.
Unless you are expecting a huge raise, winning the lottery, or a grand inheritance; the rate of savings will never pace with home appreciation rates. Don’t believe me check your local bank! Plus, there are dozens of options that may just suite your needs both short term and long. Getting in the door of homeownership is what opens up the options for future dream homes.
Waiting for the “right” time.
No time like the present. If you ask any Real Estate Professional, when is the best time to buy? They will most likely answer “a year ago”. Coulda, woulda, shoulda plagues everyone when it comes to real estate investing.
Waiting for “life” to happen.
If you are one of those individuals who is waiting due to fear of making the commitment, or buying on your own is giving up the dream of finding the perfect spouse, you are ridding the excuse train. Life is what happens when you make other plans, and opportunity comes to those who are prepared. Instead of thinking your life will become more complicated, or that you are giving up on a fairy tale future, think of it as taking care of your financial future, nothing could be more liberating and appealing!
View more entries tagged with: Benfits Of Homeownership, Buying A Home, Buyers, When To Buy, Rent Vs Buy