The following is a rent vs. buy comparison for a single family residence in Madison, WI. These numbers reflect the Madison, WI Real Estate Market and will differ from area to area. I typed this up to show those who may be on the fence about buying and scared of paying more on a mortgage than in rent how good of a decision buying a home is.
Similar to my blog comparing FHA and VA loans, this blog will use a $480 year estimate for homeowners insurance, and $3,600 year estimate for taxes, very representative numbers in our market. The loan is a 30 year fixed mortgage with no pmi.
Renting:
Current Rent $1200/mo
Annual Rent Increase 2%
Monthly Renters Insurance $10
Buying:
Down Payment $0
Loan Amount $150,000
Interest Rate 6.5%
Estimated Closing Costs $3,000
Monthly Property Taxes $300
Monthly Homeowners Insurance $40
Details of Transaction:
Annual Appreciation of Home 5%
Interest Currently Earned on Closing Costs 8%
Current Income Tax Rate 27%
Annual Home Maintenance $1,500
Result:
Before Tax Payment
Renting $1,210, Owning (PITI) $1,307
Total Payments Over 30 Years:
Rent - $587,780.34, Own - $515,541.60
Total Tax Savings Over 30 Years:
Rent - $0, Own - $81,849.45
Average After Tax Monthly Payment:
Renting - $1,632.72, Buying - $1,204.70
Favorable Option:
Home Sales Price After 30 Years - $648,291.36
Final Loan Payment - $4.51
Opportunity Cost of Closing Costs Compounded @ 8% - $32,807.19
Gain of Buying vs. Renting - $615,479.66
Total Payment Savings - $154,088.19
Combined Gain of Buying vs. Renting $769,567.85
In addition to the equity and tax savings, 30 years down the road a renter is still renting, and your mortgage is paid off.
I can make a buy vs. rent comparison for almost any scenario. If you, or a client of your would like a comparison please contact me, I am happy to assist!
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment