Buying vs. Renting Advantages
Here’s an illustration of the advantage of buying versus renting. If a family pays $1,100 per month in rent today, over the course of five years the cash outlay would be $70,081, assuming a rent increase of three percent per year, on average. At the end of five years, that family’s wealth accumulation is zero. In contrast, a household that puts $10,000 down on a $200,000 home and makes monthly mortgage payments of $1,248 would accumulate $37,643 in equity over five years.* The total cash outlay for the homeowner is $86,180, which includes the $10,000 down payment, but the resulting net worth is substantial — and probably actually more than $37,643, since the calculations do not include possible tax advantages.**
In addition to wealth accumulation, there are other benefits to buying a home. Homeowners enjoy an added degree of financial security, since they have the option of tapping into the equity of their home in case of emergencies. Most people who purchase a property feel pride of ownership as well as a sense of belonging in a community in which they have a financial stake. Last, but not least, is that great feeling of individual autonomy — it’s your home to decorate, maintain and improve the way you want!
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