I just downloaded a new National Association of Realtors (NAR) brochure which outlines thatÂ thisÂ may beÂ the best time ever to buy a home. NAR says that over the past 10 years rents have increase by an average of 3.5% a year. If that trend continues, $1000 a month in rent today will be $1300 in ten years. If you rent for the next 10 years with an average increase of 3.5% your rent in 2020 willÂ be $1363 a month. Over that 10 year period you would haveÂ paid $140,777 in rent with no return on your investment.
Obviously,Â everyone knows that if you own a home,Â you get a tax savings by being able to deduct mortgage interest and the taxes you pay on the home, in essence an automatic pay raise. In the Brochure, NAR gives a great example of the value of home ownership. In the example, let's say you purchase a $200,000 home with a $10,000 down payment and 30 year fixed mortgage at 5.5% interest. In this example your P&I (principle and interest) payment would be $1079,Â at a 1.25% real estate tax rate, you would be pay anÂ additional $208 a month in taxes for a total payment of $1287. If you are in the 25% tax bracket, your mortgage interest tax deduction would be $216 a month with an additional $52 month deduction for property taxes.
Also, if you buy before April 30, 2010, first time and many repeat home buyers may receive a tax credit of $8000 and $6500 respectivlely.
NAR does a great of outlining how home ownership can build wealth. A home purchase today for $200,000 will be worth $288, 948 in 2020 at 4.5% appreciation rate.Â Assuming again thatÂ you purchased with aÂ $10,000 down paymentÂ and aÂ $190,000 mortgage, in 2020 your balance on the home would be $156,000. In 2020 your $200,000Â home is nowÂ worth $288,948 , you only owe $156,000, and your net worth (equity) in the home is $130,000.
Homeoownership is the American Dream. Contact your local Real Estate Professional to make your dream a reality.