It may be hard to understand and it may need to
be looked over several times. Feel free to use a calculator as you go along to
check the math.
$432.00 P&I per month
$16.00 Private
mortgage insurance (until you have 20% equity in a
property)
$20.00 Homeowners Insurance
$40.00 Property taxes which can be
deducted on your state tax returns
_______
=$508.00 Per month
$108
more per month, right? It would seem that way, but here is where it gets fun.
In the beginning years of a mortgage most of
the $432.00 principal and interest payment is applied to interest. Over a 1
year period you will have paid $5,184.00 and of that $4,528.08
was in interest.
That interest can be deducted on your
taxes!! The average American falls in a 28-32% tax bracket.
So therefore take the $4,528.00
X 30%
______________
= $1,358.40
expected tax return
$1,358.00 divided by 12 months = $113.00
$508.00 per month payment on your home
-$113.00 less the tax benefits of home
ownership
_______
= $395.00 per month now out of pocket for
owning a insured home. So now the monthly cost is equal.
IT GETS BETTER!!!
Homes appreciate in value with inflation
and/or cost of living and are considered the SAFEST INVESTMENT a person
can make. Inflation has typically been 2.7% per year on the average.
Illustrated below is how a home currently worth
$65,000 will appreciate in value over 5 years.
1st
yr 2nd yr 3rd
yr 4th yr 5th yr Total
65,000 66,755
68,557 70,408 72,309
$74,261
x 2.7% > x 2.7% >
x2.7% > x2.7% > x2.7%
_______ ________ _______
_______ ______
1,755 1,802.38
1,851.04 1,901.02 1,952.35 in 5 years
$74,261 - $61,185.32 (payoff amount in 5
years) = $13,075.68 in
your pocket, not your landlords!
$13,075/60 months=$217.91 per month
$395 (per month which was established above) - $217.91= $177.08
per month out of pocket for 5 years of buying just a $65,000 home.
In 10
years following the same 2.7% a year appreciation the home is now worth
$84,842
