You can't afford NOT to buy a home

Over the past ten years, the cost of rental housing in the U.S. has increased an average of 3 percent per year. That means an apartment or home renting for $1,000 a month will cost more than $1,300 a month in ten years. If you rent the same home for ten years, the total amount you would pay for rent would equal $137,567! Can you imagine having paid that much into a mortgage that might be earning 9% per year through appreciation?

Tax advantages of OWNING a home result in savings

None of that $137,567 is returned to you, either through savings or as an investment. Homeownership, on the other hand, has tax advantages over renting a home, and those advantages can help save you money. Unlike your monthly rent, part of your monthly mortgage payment "comes back to you" in tax savings. Here's an example:

You purchase a home that costs $210,000. Your down payment is $10,000 (Plus closing costs - expenses incurred to actually process the transaction). You finance the balance with a 30-year fixed rate mortgage at 6.5% interest. Your monthly payments (not including insurance and possible HOA dues) are:

Monthly mortgage and tax payments

You actually save $390 a month by owning your own home. On a yearly basis, the savings is even more dramatic:

Total annual costs

*Based on 5% annual appreciation. Austin has been averaging just over 9% per year overall with some areas topping over 20%! Imagine the savings.

Homeownership builds wealth for households

The Federal Reserve Board estimates that homeowners have a net worth almost 36 times more than that of renters. In 2004, the median net worth for homeowners was $184,400 compared to $4,000 for renters. How do you build up your net worth? Through those "appreciating returns" on your home.

At 5% annual appreciation, you can expect your home, that is valued at $210,000, to be worth $325,779 in ten years! Keep in mind most areas of Austin are far exceeding 5% per year. In addition, you are paying down the principle on your mortgage. Remember that $200,000 you borrowed at 6.5% over 30 years? That debt amount is decreasing every month and every year. Let's look at that same home price and mortgage debt expecting only 4.5% in annual appreciation. That's even less than the 5% that we had been using!

After the first year, you know only owe $197,765 on a home that is worth $219,450! You have "netted" a $9,450 increase in the value of your home, plus $2,235 a year that previously you owed as part of your mortgage debt. As your debt decreases and the home value increases, you accumulate wealth from the value of your home. In addition, over this ten year period, you will have a significantly lower after-tax payment for housing. Each year your home appreciates and you continue to pay down your mortgage debt, you increase your own net worth!

Homeownership - It's NOT just about the money

The "numbers tell the story" should help ease your mind about the financial aspects of becoming a home owner. But there are other, less monetary, benefits to homeownership. Several research studies indicate homeownership adds to the value of communities, has positive effects on children, and even contributes to increased voter participation rates.

Homeownership: The American dream

More than two thirds of American households own their home. They know the benefits of homeownership., from the accumulation of home equity, tax incentives, and the pride of owning a place of their own. They also had to make that first step of deciding "I'm ready to be a homeowner." REALTORS assisted many of those more than 71 million homeowners in both their decision to buy and their first home purchase. I am a professional Realtor and I am a member of the National Association of Realtors, so I abide by the association's strict Code of Ethics and Standards of Practice. I can help guide you to first-time homebuyer programs in your area, as well as assist you in searching for and buying your dream home. Contact me for more information and make sure to check out my Buyers section for even more first-time home buyer information!