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INVEST
IN YOURSELF
The truth is... You cannot afford NOT to own your own house.
A few thoughts... According to a news article appearing in the
Washington Times written by Katie Dunn, "Want to Build Wealth?
Try Buying a Home." She states, "Most Americans fail to understand
that affluence is based more on home ownership than anything
else, according to the study and survey conducted by consumer
research group and Providian Financial". The article also states
that houses represent 34% of the wealth for people who have
$100,000 or more in assets. Steven Brobeck, Chief Executive
of the Consumer Federation of American said "Even with a modest
income your build wealth by getting a home."
As you probably already know, a family's home represents the
single largest investment alternative for most Americans. But
the proof is in the numbers as the analyses below illustrates
a comparison of renting vs owning your home...given the assumptions
below, your family's personal wealth will increase over $126,000
over ten years by becoming a homeowner.
|
| Annual
Appreciation |
| Year |
Home |
Loan
Balance |
Created
Value |
| 1 |
$141,750 |
$133,963 |
$8,057 |
| 2 |
$148,837 |
$132,289 |
$16,548 |
| 3 |
$156,279 |
$130,779 |
$25,500 |
| 4 |
$164,093 |
$129,156 |
$34,937 |
| 5 |
$172,298 |
$127,411 |
$44,887 |
|
| Annual
Tax Savings |
| Year |
Annual
Interest |
Annual
RE Tax |
Total
Deduct |
Tax
Benefit |
| 1 |
$9,744 |
$2,200 |
$11,944 |
$
3,344 |
| 2 |
$9,647 |
$2,200 |
$11,847 |
$
3,317 |
| 3 |
$9,541 |
$2,200 |
$11,741 |
$
3,287 |
| 4 |
$9,428 |
$2,200 |
$11,628 |
$
3,256 |
| 5 |
$9,306 |
$2,200 |
$11,506 |
$
3,222 |
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| Annual
Cash Flow Difference: Rent vs. Own |
| Year |
Rent |
*Mortgage |
Difference |
| 1 |
$850 |
$1,146 |
$(3,552) |
| 2 |
$893 |
$1,146 |
$(3,036) |
| 3 |
$938 |
$1,146 |
$(2,496) |
| 4 |
$985 |
$1,146 |
$(1,932) |
| 5 |
$1,035 |
$1,146 |
$(1,332) |
|
| Total
Benefit of Owning vs. Rent |
| Year |
Equity |
Tax
Savings |
Cash
Difference |
Created
Wealth |
| 1 |
$8,057 |
$3,344 |
$(3,552) |
$
7,849 |
| 2 |
$16,548 |
$6,661 |
$(6,588) |
$
16,621 |
| 3 |
$25,500 |
$9,948 |
$(9,084) |
$26,364 |
| 4 |
$34,937 |
$13,204 |
$(11,016) |
$
37,125 |
| 5 |
$44,887 |
$16,426 |
$(12,348) |
$48,965 |
| 10 |
$103,382 |
$31,928 |
$(9,048) |
$126,262 |
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*Mortgage
includes: principal, interest, taxes, insurance
Other Assumptions:
1. Purchase Price of House: $135,000
2. Amount of Mortgage: $135,000
3. Interest Rate: 7.25% (owning advantage higher w/ lower rates)
4. Loan term: 30 years
5. Borrower tax bracket: 28%
6. Rent Increase: 5% per year
7. Housing Appreciation: 5% per year
8. Annual homeowners Insurance $500 |
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