Update 3: 46. m.
ET (MoneyWatch)
If you're ready to be a homeowner and you understand what you're doing, it's not a bad thing to buy a house with your money.
But if you use the well to justify the purchase
Shabby: "I just want to stop throwing away the rent" and you're going to be doing a stupid monetary action that sounds smart because no one has ever calculated math.
How can I question the clear logic of this era? old wisdom?
After all, you build equity in the house.
You're not building equity by renting a house, are you? Absolutely.
But to inject a little bit of reality into this dubious wisdom, let's look at the numbers.
Popular live news: the Tony Award deadly crane collapse trophy hunting documentary Women's World Cup makes it easier, assuming you buy a $240,000 house with a down payment of $40,000.
This way you can get a loan of $200,000 at 4. 5 percent (
Let's say you have good credit and interest rates won't go up).
Your mortgage on that loan is $1,014.
Again, for simplicity, we assume that this is roughly the same as the rent you paid. (
If your rent is low or high, obviously adjust the numbers. )
But to get a mortgage you need to pay the "settlement fee "---
These are the various fees paid for the assessment, ownership insurance, hosting services and the handling of the loan by the lender. Bankrate.
Com estimates that a homeowner who borrowed $200,000 would pay an average of $3,754. (You can get "no-
But you will usually pay a higher interest rate to get a loan, so you will pay it one way or another. )
In other words, if your rent is exactly the same as your mortgage, you will buy from $3,754.
You said, "Never be afraid . "
"When I pay off the loan, I will recover the money by setting up the principal!
"Reality Check: according to Bankrate's Amortization calculator, your mortgage balance fell to $196,498 at the end of the first year. com.
In other words, the total share capital you have accumulated is $250 less than the final cost of paying the loan.
Do you think the second year is better?
Not fast, sir. Happy.
You may have forgotten the property tax?
If you are in an area where there is no special assessment (
And very rare)
Property taxes bring you $2,400 a year. -
About 1% of the valuation.
You might actually pay more. -
Somewhere near $3,000.
And, you also need insurance from the homeowner because you can't get a loan without it.
To be conservative, we assume that insurance costs only $500 more than your rental r (if you had one).
So now you have about $3,500 a year.
About $300 per month)
More than the cost of renting a house
Did you put it back in the building?
To be the principal in your house the next year? Sorry, no.
At the end of your second year of owning the house, you gained another $3,388 in equity.
You owe $193,110.
Again, your assets are a few hundred dollars less than your spending on property taxes and insurance.
Even worse, even if your assets start to accelerate in the next few years, your property taxes may rise.
County governments usually "re-
Assess property value and taxes every year.
Lest we forget that you may also pay a lot more for utilities, gas and electricity than you do for rent r.
You have maintenance now.
After all, you're a gardener now. -
Or rent one. -
If your water pipe is blocked or the dishwasher is broken, you have to call the repairman instead of your landlord to fix it.
At the very least, you should know that in an ordinary house, the cost of repairs and utilities will cost you about $150 a month.
What about the lucrative tax breaks you 've heard?
As a homeowner, you can deduct the mortgage interest and the cost of the property tax.
However, these deductions will only help you reach the point where the standard deduction is exceeded, which is $8,950 if you are single, and $12,200 if you are married.
The deductible mortgage interest for the first year of the loan was $9,500.
Increase property taxes, you can deduct up to $12,000-
If you are married, less than the standard deduction, and if you are single, $3,000 more than the standard deduction.
Let's say you pay 30% of your income tax and if you're single, these lucrative tax cuts save you $1,000 a year and nothing if you're married.
But you say that the value of the house will appreciate and you will leave with a fortune when you sell the house?
Assuming there is no other housing bubble and your house is really beautiful, your house has to appreciate significantly before you can rent r better than normal.
Let's assume that you want to sell your house in five years, when your house is 15% more than when you bought it.
That means you will sell it for $276,000.
However, the real estate agent may need 6%-$16,560 --
Commission for their sales.
In the closing price, you may also need to pay 1% of the sales price.
Now your net selling price is $256,740.
But since you have to pay off a little loan every month, you owe only $181,968.
You cashed in $74,712. Brilliant move?
OK, let's compare your net profit to your rental r.
He didn't get your tax deduction and we estimate it to be $100 a month.
But he doesn't need to put $40,000 into the house down payment, and he has more billable income because he doesn't need to pay the property tax, insurance, extra utilities and repairs.
Let's say he adds that $40,000 to $350 a month (
This is your $450 more per month minus the $100 tax benefit per month)
In five years when a mutual fund has an average income of more than 7%, he wants $81,762.
$7,000 more than you.
But why do homeowners always get rich faster?
Probably because most renters don't save the money they don't spend on ownership of the house.
The house is a mandatory savings plan and you have to be involved as long as you want a roof on your head.
Renting r is not forced to save.
They can go to the bar.
I mean, is it stupid to own a house? Not at all.
This is a great way to spend money if you want a home.
There are few places to spend more time or appreciate than your own kitchen, living room or garden.
But don't delude yourself into thinking this is an amazing "investment ".
Edit note: Earlier versions of this article contain mathematical errors.
It has been clarified since then and we apologize for this mistake.