I am frequently asked by people who are currently renting, “What are the advantages of home ownership.” Instead of a long explanation I will provide a simple financial example that I hope will illustrate show you the advantage.
| Assumptions: | |||
| Current Rent: | $1,500 | ||
| Purchase Price of Home: | $350,000 | ||
| Down Payment: | $0 | ||
| Interest Rate: | 7.50% | ||
| Years You Stay In Home: | 5 | ||
| Property Tax Rate: | 1% | ||
| Annual Home Appreciation Rate: | 7% | ||
| Annual Rent Increase Rate: | 7% | ||
| Tax Rate: | 28% | ||
| Calculations | Rent | Own | |
| Average Monthly Payment Over 5 Years | $1,854 | $2,700 | |
| Tax Savings Per Month (28% Tax Rate) | $0 | $733 | |
| Monthly Payment After Tax Advantages | $1,854 | $1,967 | |
| Total Paid Out in 5 Years | $111,266 | $118,042 | |
| Monthly Payment at End Of 5 Years | $2,251 | $1,967 | |
| Price of Home After Appreciation | $490,893 | ||
| Loan Balance After 5 Years | $331,161 | ||
| Net Equity After 5 Years | $0.00 | $159,732 | |
Thus, at the end of 5 years, with almost no difference in the amount spent monthly for payments vs. rent, you will have a fixed payment that will be lower than the current rent price and almost $160,000 in equity.
If you would like to experiment with a rent vs. own calculator, check out this web page.
If you are looking for a new or resale home, I hope you will call upon me.
Best regards,
Eric Fernwood
Cell: 702-358-8884
Eric@ISellLVHomes.com
http://www.iselllvhomes.com/
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