Renting vs. Owning
Can you afford to buy a home in today’s market? Is there really any benefit to you?
Here are 2 important points to consider:
- Home values in Orange, Ca. have more than doubled in the last 20 years!
Even with the big crash in values during the 2008-2011 period, today’s home values are at least double what they were 20 years ago!So, a $200,000 home is now worth $400,000. That is $200,000 in equity gained by the homeowners over that period. A couple who rented over that same period of time would have gotten no gain, as all the gain in home value went to their landlord.
There is another factor! Over those 20 years, just making the normal mortgage payment, that $200,000 loan on that home would be below $100,000. So, now that home is worth $400,000 and they only owe $100,000! They have equity of about $300,000!
- Does it really cost more to buy than to rent?
Let’s take an example of a typical home renting for $2400. That same home, if it sells today for $400,000, would have total payments of about $2900. That covers the mortgage, property taxes and insurances.
But, the homeowner gets tax breaks. He gets to deduct the mortgage interest paid on the home.
This is about $16,000-$18,000 per year! He also gets to deduct his property taxes of about $5000 per year. So, the homeowner gets tax deductions of over $20,000 per year. That is $20,000 worth of his income that he won’t be taxed on. The savings on that could be significant, depending on the tax rate of the homeowner. It could be as much as several thousand dollars. So, that $2400 the renter is paying and the $2900 the homeowner is paying end up being very similar at the end of the day.
If you have considered becoming a home owner, I am happy to discuss this in detail with you. Let’s find out if home ownership benefits you!