| Advantages of Buying vs. Renting I - If you are delaying a purchase to save up on a down payment, it may be a losing cause. If homes appreciate at 4.5% annually, then a $150,000 home will cost $156,750 next year. So if you save $500 a month you will still have a higher mortgage than this year. Additionally, you will be paying $6,750 more for the home and will have lost that amount of equity appreciation. Same is true if you are waiting for a "better credit report so your interest rate is lower."
- If you are waiting for interest rates to drop, there is no guarantee. If they do drop, you can re-finance. If they rise, it will cost you more. The safe bet is to buy now.
- If you have a median family income, then your combined (State and Federal) marginal (last dollars earned) tax bracket is probably over 35%. That means for every $1000 of interest and real estate taxes, you are eligible for a refund of $350 to $400.
Over the last ten years, the cost of rental housing in the U.S. has increased an average of 3% per year. The apartment or home that rents for $750 a month will cost a renter more than $978 a month 10 years from now. In sum, to wait is a losing battle… You lose on appreciation, tax write offs, equity buildup and, perhaps, interest rates.
How Rent Accumulates | Monthly Rent | 5 Years | 10 Years | 15 Years | 20 Years | 30 Years | $500.00 | $ 30,00.00 | $60,000.00 | $90,000.00 | $120,000.00 | $180,000.00 | $550.00 | $33,000.00 | $66,000.00 | $99,000.00 | $132,000.00 | $198,000.00 | $600.00 | $36,000.00 | $72,000.00 | $108,000.00 | $144,000.00 | $216,000.00 | $650.00 | $39,000.00 | $78,000.00 | $117,000.00 | $156,000.00 | $234,000.00 | $700.00 | $42,000.00 | $84,000.00 | $126,000.00 | $168,000.00 | $252,000.00 | $750.00 | $45,000.00 | $90,000.00 | $135,000.00 | $180,000.00 | $270,000.00 | $800.00 | $48,000.00 | $96,000.00 | $144,000.00 | $192,000.00 | $288,000.00 | $850.00 | $51,000.00 | $102,000.00 | $153,000.00 | $204,000.00 | $306,000.00 | $900.00 | $54,000.00 | $108,000.00 | $162,000.00 | $216,000.00 | $324,000.00 | $950.00 | $57,000.00 | $114,000.00 | $171,000.00 | $228,000.00 | $342,000.00 | $1,000.00 | $60,000.00 | $120,000.00 | $180,000.00 | $240,000.00 | $360,000.00 | $1,050.00 | $63,000.00 | $126,000.00 | $189,000.00 | $252,000.00 | $378,000.00 | $1,100.00 | $66,000.00 | $132,000.00 | $198,000.00 | $264,000.00 | $396,000.00 | $1,150.00 | $69,000.00 | $138,000.00 | $207,000.00 | $276,000.00 | $414,000.00 | $1,200.00 | $72,000.00 | $144,000.00 | $216,000.00 | $288,000.00 | $432,000.00 | $1,250.00 | $75,000.00 | $150,000.00 | $225,000.00 | $300,000.00 | $450,000.00 | $1,300.00 | $78,000.00 | $156,000.00 | $234,000.00 | $312,000.00 | $468,000.00 | $1,350.00 | $81,000.00 | $162,000.00 | $243,000.00 | $324,000.00 | $486,000.00 | $1,400.00 | $84,000.00 | $168,000.00 | $252,000.00 | $336,000.00 | $504,000.00 | $1,450.00 | $87,000.00 | $174,000.00 | $261,000.00 | $348,000.00 | $522,000.00 | $1,500.00 | $90,000.00 | $180,000.00 | $270,000.00 | $360,000.00 | $540,000.00 | $1,550.00 | $93,000.00 | $186,000.00 | $279,000.00 | $372,000.00 | $558,000.00 | $1,600.00 | $96,000.00 | $192,000.00 | $288,000.00 | $384,000.00 | $576,000.00 | $1,650.00 | $99,000.00 | $198,000.00 | $297,000.00 | $396,000.00 | $594,000.00 |
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