Who's building Wealth? You or Your Landlord?
I usually get scoffed at for the statement "people have to live somewhere" when referring to owning a home and current housing prices. However, it doesn't change the fact that housing is a part of life. In the above example, the tenant rents for $2,200 per month (not including first, last, and any pet deposits) and how much they'll pay their landlord over a 1 yr, 2 yr, and 5yr lease.
- 1 Year Lease = $26,400
- 2 Year Lease = $52,600
- 5 Year Lease = $132,000
I've had clients who started out renting an apartment then moved onto a home(s) and have continued to rent throughout the last 20 years. During those years leading up to buying, they thought owning a home was far out of reach yet they had no control over rental increases whether they stayed or changed residences.
When owning a home, on a fixed interest rate, mortgage payments stay relatively unchanged through the life of the loan.
*(if property taxes increase due to rising home values or insurance coverage is increased then homeowners can expect their mortgage payments to adjust since its common place in Washington State for taxes and insurance to be included in a mortgage payment)
This is where wealth building begins.
If a homeowner pays their mortgage payment for 5 years at $2,200 a month then they can expect to have a portion of those funds pay down the mortgage principal during that 5 years. This in turn allows the homeowner to build wealth, or equity, in the residence while receiving an additional benefit of appreciating housing market and tax deductions. This is unlike renting where those paid in funds are never applied to any future ownership and only go to increase the landlords wealth.
There are many other benefits to homeownership that could outlined yet we wanted to share a snapshot how much money could be saved by purchasing a home. Contact us to start the process towards home ownership. Not ready to purchase a home or just want to conduct additional research on how to improve a credit score, improving personal finances, qualifying for a home loan, or learn about the process of buying a home? Then read the following articles and click through to some other helpful websites below.
- 10 Simple Ways to Improve Credit
- Improving Personal Finances
- The Do's & Don'ts of a Smooth Loan Approval
- Top Myths regarding Home Loans
- The Home Buying Contract