In many cases, the amount of money a renter spends on rent can be about the same as or less than the amount a homeowner spends on a mortgage. With the tax benefit for homeowners, the savings can be significant.
Buy Vs. Rent Comparison
The chart below shows a cost comparison for a renter and a homeowner over a seven year period.
- The renter starts out paying $800 per month with annual increases of 5%
- The homeowner purchases a home for $110,000 and pays a monthly mortgage of $1,000
- After 6 years, the homeowner’s payment is lower than the renter’s monthly payment
- With the tax savings of homeownership, the homeowner’s payment is less than the rental payment after 3 years
|
Years
|
Rent Payment
|
Mortgage Payment
|
Monthly Difference
|
After Tax Savings
|
Yearly Difference
|
After Tax Savings
|
|
1
|
800
|
1000
|
-200
|
-50
|
-2400
|
-600
|
|
2
|
840
|
1000
|
-160
|
-10
|
-1920
|
-120
|
|
3
|
882
|
1000
|
-118
|
+32
|
-1416
|
+384
|
|
4
|
926
|
1000
|
-74
|
+76
|
-888
|
+912
|
|
5
|
972
|
1000
|
-28
|
+122
|
-336
|
+1464
|
|
6
|
1021
|
1000
|
+21
|
+171
|
+252
|
+2052
|
|
7
|
1072
|
1000
|
+72
|
+222
|
+864
|
+2664
|
|
8-30
|
Savings increase every year
|
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Your rental company takes part of your rent payment to cover certain housing expenses. When you decide to purchase a home, you accept responsibility for paying for these expenses (listed below). They are additional costs to your monthly mortgage payment and should be included in your budget estimates:
- Property Taxes and Special Assessments
- Home/Hazard Insurance
- Utilities
- Maintenance
- Home Owner Association (HOA) Fee: Doesn’t apply to all purchases. It pays for trash and snow removal and maintenance of common grounds if applicable.
- Membership Fee: It may pay for recreational facilities and other services (cable TV).
Thanks. Appreciate the support.