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Deciding whether it is the right time to buy or rent can be a tough decision. Renters often ask how owning a home and making a mortgage payment compares to renting. Many factors come into play when owning a home such as tax savings and appreciation. The example below is a great comparison showing what your monthly investment would be to own a home after tax savings and appreciation are figured in versus spending the money on renting a home.
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Owning your own Home**
3 bedroom / 2-3 baths
Yard & extra storage
1500-2000 finished square feet
2 car attached garage |
vs. |
Renting an Apartment**
2 bedroom / 2 bath
1000-1100 finished square feet
1 car detached garage
$1000-$1200 + utilities |
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Sale Price: |
$175,000 |
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Downpayment: |
$ 3,500 |
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Mortgage Amount: |
$171,500 |
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Principle &
Interest @ 6.5%: |
$1084 / mo. |
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Taxes $1300: |
$ 108 / mo. |
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Insurance $350: |
$ 30 / mo. |
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Mortgage Insurance: |
$ 75 / mo. |
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$1297 / total monthly payment with taxes and insurance. |
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Tax Savings: |
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Interest 1st year: |
$11,147.50 |
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Taxes 1st year: |
$ 1,300.00 |
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$12,447.50 |
$12,447.50 x 38% = 4730.05 = $394.17 per month tax savings
Standard Deduction used.
Appreciation:
$175,000 x 5% = $8,750 per year / 12 months = $729 per month
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Monthly Mortgage Payment: |
$1297.00 |
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Monthly Tax Savings: |
$ -394.17 |
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Monthly Appreciation: |
$ -729.00 |
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$ 173.83 |
Your monthly investment to own the home in this example would be $173.83 as compared to the $1000.00 that you would be spending on rent!
**The example used above is strictly for comparison purposes only and does not represent any specific property, does not guarantee the ability to find a property with the exact criteria as listed above, and does not guarantee any specific loan rates or terms. Estimations and assumptions were used in the above example.
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