Is Home Ownership Right For Everyone?
Ask yourself a few questions: Why do you want to own your home? What are your benefits? Is home ownership for you?
Myth – home ownership is for all and all want home ownership.
Fact – Neither is true.
Let’s look at three scenarios of home ownership. Our assumptions are: (1) a married couple with (2) a 680/700 middle FICO Score (3) a net annual income of $26,000-76,000 and (4) limited to a 60 month timeframe for comparative purposes. (5) Further, we are assuming an annual rental increase of five percent with (6) an income tax rate of 15% with (7) an FHA minimum down payment 30 year fixed rate mortgage and (8) a conservative annual appreciation of three percent. Finally, and most important, the monthly rental payment assumptions are the same as the monthly PITI payment per scenario.
|Total Rent Cash Flow *||$62,992.20||$72,983.33||$139,245.91|
|+ 60 Month Equity||$13, 871.00||$21,366.00||$33,687.00|
|+ 5 year Appreciation||$27,872.96||$43,800.37||$67,691.48|
|+ 60 Month Tax Benefit||$6,120.80||$9,482.11||$14,864.79|
|– Housing Expense||$54,676.20||$84,220.20||$132,785.79|
|Benefit – 5 years only||$55,302.61||$61,959.96||$120,571.13|
*Total rent paid plus loss of equity gain less home loan origination cost.
By an odd fluke, rental vacancies are very low right now and, unlike in a normal market, rents are relatively stable in much of the greater Denver area. My anecdotal evidence is that the more viable rental properties are increasing rents by the historic annual average of five percent, some by more.
Why would you not want to own a home? I think there are many valid reasons to be a renter and be proud of it. (1) You do not want to be tied down – freedom of movement is very important to you. (2) You do not want to mow the lawn or shovel snow and trim hedges – I can certainly relate to that one. (3) You are a younger person and loving the mix and meet apartment complex – I remember those days. (4) You simply do not want the responsibility (maintenance/repair) of home ownership and you would rather just rent – This, too, seems pretty reasonable to me.
Bottom line – when you are ready to have a fixed housing expense and the benefits of home ownership, we are here to help you achieve your goal in the best possible manner.
Image Credit: Google Images