| Advantages | Considerations | |
| BUY | Property builds equity | Responsible for Maintenance |
| Sense of community, stability, and security | Responsible for property taxes | |
| Free to change decor and landscaping | Possibility of foreclosure and loss of equity | |
| Not dependent on landlord to maintain property | Less mobility than renting | |
| RENT | Little or no responsibility for maintenance | No tax benefits |
| Easier to move | No equity is built up | |
| No control over rent increases | ||
| Possibility of eviction |
Purchasing a home can provide valuable tax savings to homebuyers. Mortgage interest, property tax, and other payments associated with financing a home can apply to your tax deductions. They may decrease the amount of income tax you must pay to the federal government.
Another financial advantage to owning a home is that as you begin to pay off your mortgage loan, you build equity in your property. In other words, the value of your home can increase as your total mortgage amount decreases over time.
For those who rent, the tax savings of ownership go to the landlord, not to the tenants. Wouldn't you rather build equity for yourself every month instead of paying someone else and giving away "your" tax savings?
| Years | Rent Payment | Mortgage Payment | Monthly Difference | After Tax Savings | Yearly Difference | After Tax Savings |
| 1 | $1,000 | $1,200 | -$200 | -$50 | -$2,400 | -$600 |
| 2 | $1,050 | $1,200 | -$150 | -$10 | -$1,800 | -$120 |
| 3 | $1,103 | $1,200 | -$98 | $32 | -$1,170 | $384 |
| 4 | $1,158 | $1,200 | -$42 | $76 | -$509 | $912 |
| 5 | $1,216 | $1,200 | $16 | $122 | $186 | $1,464 |
| 6 | $1,276 | $1,200 | $76 | $171 | $915 | $2,052 |
| 7 | $1,340 | $1,200 | $140 | $222 | $1,681 | $2,664 |
| 8-30 | Savings Increase Every Year |
|||||
| Years | Yearly Rent Payment | Yearly Mortgage Payment | Yearly Principle Reduction | Yearly Appreciation | Yearly Equity Savings |
| 1 | $12,000 | $14,400 | $2,456 | $8,000 | $10,456 |
| 2 | $12,600 | $14,400 | $2,608 | $8,320 | $10,928 |
| 3 | $13,230 | $14,400 | $2,768 | $8,653 | $11,421 |
| 4 | $13,892 | $14,400 | $2,939 | $8,999 | $11,938 |
| 5 | $14,586 | $14,400 | $3,121 | $9,359 | $12,480 |
| 6 | $15,315 | $14,400 | $3,312 | $9,733 | $13,045 |
| 7 | $16,081 | $14,400 | $3,517 | $10,123 | $13,640 |
| Totals | $97,704 | $100,800 | $20,721 | $63,186 | $83,907 |
* All calculations are based on recent rates and are not guaranteed. Individual results may vary
If you rent the home you live in, the right planning could enable you to buy a home.
To discover your home buying potential, calculate your:
These factors determine how big a loan you can afford and how buying a home will affect your monthly budget.
Review all of your sources of income. You will not need money for a down payment nor for closing costs for most first time home purchases. The FHA and VA have mortgage programs that require smaller down payments. Closing costs may sometimes be rolled into the mortgage.
Answering these questions may also help you to estimate your financial position.
Use the income categories worksheet to estimate your monthly savings:
Monthly Financial Worksheets - HTML
Monthly Financial Worksheets - Excel
Add up your savings. Any money saved can help you buy a home. Your savings can be used to pay the down payment, closing costs, and/or new furniture. You know your own saving habits.
Use the savings categories worksheet to estimate your monthly savings:
Monthly Financial Worksheets - HTML
Monthly Financial Worksheets - Excel
How much are you spending each month? A written budget of your monthly expenses is always a good idea; but it can be invaluable in determining how much home you can purchase.
Use the monthly expenses categories worksheet to estimate your monthly expenses:
Monthly Financial Worksheets - HTML
Monthly Financial Worksheets - Excel
Review your current debt obligations. A lender will examine the ratio of your debt to your income when deciding how much money to lend you.
Consider how additional debt from house payments, added to your existing debt, will affect your lifestyle.
Use the debt categories worksheet to estimate your monthly debt:
Monthly Financial Worksheets - HTML
Monthly Financial Worksheets - Excel
Federal Housing Administration (FHA) Loans:
FHA mortgage programs are available to all buyers. These programs are designed to help creditworthy low-income and moderate-income families who do not meet requirements for conventional loans. FHA loan programs are particularly beneficial to those buyers with less available cash.
FHA loan benefits:
Department of Veterans Affairs (VA) Loans:
VA loan programs are available to eligible veterans for the purchase of a home. The VA guaranty loans encourage lenders to offer loans to veterans by protecting lenders against loss if the borrower cannot make the payments. VA loans are particularly beneficial to those veterans that do not have much cash available. VA guidelines allow higher front-end and debt ratios compared to other loan programs.
VA loan benefits:
Kevin C. Chapman,
Residential Specialist
719-964-2831
E-Mail Me
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