So Why are you Renting?

By Dave McKean

Saturday, June 29, 2019

If a client is buying their first home for say $500,000.00 and they have a 3.5% down payment with a strong credit score their payment will look like this: Principal and Interest $2308.60 (1585.34 Interest $723.26 Principal), Property taxes $521.00, Insurance $80.00, PMI = $347.75 = $3257.35 So the $3257.35 is your payment and you are paying off $723.26 and putting that in long term savings account called equity. Property values have also gone up by 5.6% annually over the past 55 years, so if your property goes up by just 3% annually then your property will go up by $15,000.00 the first year or $1250.00 per month which is another form of long term savings and it is tax free for the first $250,000.00 if you are single and $500,000.00 if you are married! So $3257.35 - $723.26 - $1250.00 = $1284.09 is the true cost of buying a home! Now if you want to go a little crazy and put that appreciation into your +/- 30% tax bracket then you would have to make $1785.00 per month to net $1250.00 so that's an additional $535.00 per month you will avoid paying in taxes to get the same amount of savings! I know this is probably confusing, but if all goes well and your house appreciates by 3% annually, the true cost is closer to $749.00 per month! So why are you renting?
Categories: Mortgage Related News