Renting vs. Buying - What Is Best For You?
Renting vs. Buying - What Is Best For You?
Should I rent or should I buy? If you are renting in Birmingham AL you may be asking yourself these questions. There are certainly some attractive reasons to consider purchasing a home.....historically low interest rates are still available and the $8,000 First Time Homebuyer Tax Credit has been extended until April 30, 2010.
Kathy Stankard has written a great article that compares the costs of renting and buying. For many, this is a wonderful opportunity to become a homeowner. Click on Birmingham AL Home Search to see available homes in Birmingham and surrounding areas.
If your rent is $1,199/month rent, your annual rent is $14,388. That money is gone. Poof! Well, not exactly gone, because your landlord is smiling because, well, you're buying his home for him!
Assume on the other hand that you have a $220,000 home with a $200,000 mortgage. Your monthly payment is about $1,199 P+ I, at 6 percent interest and amortized over 30 years - just what your rent would have cost.
The interest on your loan (6 percent x 200,000) = $12,000 per year. Assuming you're in a 30 percent tax bracket, you have a tax savings of $12,000 x 30 percent = $3,600 per year.
Assume that your home appreciates on average 5 percent a year, a reasonable assumption over time. Thus, in one year your $220,000 home is worth $11,000 more, and is now valued at $231,000.
$11,000 + $14,388 + $3,600 = $28,988.
This is what you paid yourself to own your home - instead of paying for your landlord's home!
Better yet, after just five years of appreciation at 5 percent a year, your home is worth $280,782, and you're $60,782 richer.
Had you rented for five years, your total rent cost would have been $14,388 x 5 = $71,940.
Now, would you rather rent or buy?
Kathy Stankard
The Kelly & Colombo Group
RE/MAX Executive Realty
cell: 508-369-5131
email: franklinmahomes@comcast.net
website: www.franklinmahomes.com
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