Why you should buy a home in the first place.
Here's a very informative list from http://top10lists.freewebpage.org, which has lists you normally wouldn't find on Late Night TV. I'll try to post some more of them later.
This site contains a series of Top 10 Lists concerned with buying your own home,and saving money while you do.
You'll find alot of useful information here, including an article with Federal Reserve Chairman Alan Greenspan discussing mortgages in a speech at the meeting of the Credit Union National Association. You'll probably find the site most useful if you go through the lists from top to bottom, but that's up to you.
Top 10 Reasons to Buy Your Own Home and Quit Renting
10. You're paying off your landlord's property. Every time you make a rent payment, your landlord uses some part of that to pay off the mortgage on the home you're renting...AND KEEPS THE REST!
9. For most people, their biggest retirement savings is the value in their home. Today, most people fail to save much actual cash each year in a retirement account, and who knows what your pension (if you're lucky enough to have one) or Social Security will pay when you retire. When most people retire, the equity they pull out by selling their home and moving to a smaller, easier to care for home is their major source of funds. Plus up to $500,000.00 of it is tax free for married couples!
8. You get zero (0) tax credit for renting a home, while almost all of the money you spend on a mortgage is tax deductible for the first 10 to 15 years on a 30 year mortgage. Because of how mortgages are structured, in first 1/3 to 1/2 of the term you're paying off very little principal. Currently, all of the interest you're paying, plus in most cases the property taxes and hazard/flood insurance premiums can be tax deductible. Ask your accountant for more info.
7. Buying a home is almost always less exspensive than renting the same house. Why is this? Because your landlord needs to make a profit on their investment. So your rent payment is what they calculate they pay for their mortgage, including taxes and insurance, plus money for repairs and maintainence, PLUS their profit each month. This profit can be 20-30% of your rent payment or more! In addition, they also "earn" equity every year, as the value of their property increases, plus the amount of rent the local market allows them to charge usually increases as well.
6. You gain value through equity (appreciation) when buying your home, as the value of the house and property increases. Of course, if you are renting, your landlord gets this extra money when they eventually sell the property you helped them buy.
5. With the 80/20 and 95% financing plans some lenders offer, you can buy a home with very low or no down payment, just closing costs. Your bank or credit union may not offer 95-100% financing plans, but many lenders you can access through mortgage brokers do. If you qualify (which isn't as hard as you probably think) you can buy your home by paying only your closing costs. And if the home you find is worth $5000-$10,000 more than the asking price, you may be able to work with the seller to get them to pay all closing costs, while selling the house to you at its appraised value. You could own your home without any out of pocket expense!
4. Interest Only Mortgages can save you even more, and you still gain equity through appreciation! Interest only mortgages allow you to pay only the interest that accrues on your loan on a monthly basis. This reduces your out of pocket payment, and let's you finance a larger amount, since you usually only have to qualify for the smaller payment. They also usually have a cut off several years into the mortgage when you have to start paying on the principal. The idea is that you will either have moved by then (the average homeowner moves every 7 years) or else your income will have increased due to raises and/or a promotion. Of course, you always have the option of refinancing at that time as well. PLUS, you still gain equity during this time as your house gains in value through appreciation. In fact, the amount that appreciation adds to your equity is usually a much larger factor than the amount of principal you pay off in the first 10 years of a 30 year mortgage. For example, on a $180,000.00 mortgage, the first year you pay off about $1000.00 of principal with a 30 year mortgage, but with appreciation of just 3% (very conservative, most areas average 5% or more!), you gain $5400.00 in equity!
3. Adjustable Payment Plans can mean YOU choose what you pay each month. Some mortgage plans available through mortgage brokers let you pick from several payment options each month. Can you imagine your landlord allowing you to do that? A fairly common program is to offer 3 options;
-Paying a payment equal to a 15 year mortgage payment
-Paying a payment equal to a 30 year mortgage payment
-Paying a payment equal to an interest only mortgage payment
Some plans even offer a fourth option that is less than the interest only payment, and you only have to qualify for the lowest option! Then YOU pick which payment you want to make each month. This plan is especially good if you are a commissioned sales person or someone whose income varies quite a bit month to month.
2. You control what you do with your own home. You can do improvements to the existing house, add on a room or several, remodel or add a swimming pool, and YOU, not your landlord, benefit from these improvements! Any of these can increase your home's value, and you reap the benefits of a nicer home while you're there, and the extra profit when you sell. Plus, the ultimate control is that you have no lease to worry about. If you want to move, you put your house up for sale, sell it, and move. You don't have to stay the remanider of a year lease or pay any kind of fee. You decide where you want to live and for how long, and make a "moving bonus" when you do sell.
1. The number one reason to buy instead of rent is to SAVE the money you spend on housing, not THROW IT AWAY! Rent payments are just an expense, you pay "X" amount to have the right to live in a space for a certain amount of time. When you buy, a large portion of your payment is being "saved" in the value of your home. In fact, with interest rates currently so low, and appreciation in most areas in the 5-10% range or higher, you may even be "saving" more than you spend every month! For example, for a $180,000 mortgage your total payment, including taxes and interest, could be around $1300.00 a month($15,600 a year), and you'd pay off about $1000.00 in principal the first year. If that same property (valued at $200,000, we're assuming 10% down for this example) appreciates at only 8%, it would increase in value $16,000 the first year + the $1000 you paid off in principal, means you've put $17,000 in your "savings" account, and it only cost you $15,600 to do it! Plus, you have about $14,500 in tax deductions for your mortgage interest!
Stop wasting your money on Rent every month, start SAVING it in your own home TODAY.
Check out my other Top 10 Lists - They'll expalin why an ARM (adjustable rate mortgage) is usually a better deal, and why getting your mortgage through a licensed Mortgage Broker is usually a much better deal than your bank or credit union.
I'll send the next one of these soon.
This site contains a series of Top 10 Lists concerned with buying your own home,and saving money while you do.
You'll find alot of useful information here, including an article with Federal Reserve Chairman Alan Greenspan discussing mortgages in a speech at the meeting of the Credit Union National Association. You'll probably find the site most useful if you go through the lists from top to bottom, but that's up to you.
Top 10 Reasons to Buy Your Own Home and Quit Renting
10. You're paying off your landlord's property. Every time you make a rent payment, your landlord uses some part of that to pay off the mortgage on the home you're renting...AND KEEPS THE REST!
9. For most people, their biggest retirement savings is the value in their home. Today, most people fail to save much actual cash each year in a retirement account, and who knows what your pension (if you're lucky enough to have one) or Social Security will pay when you retire. When most people retire, the equity they pull out by selling their home and moving to a smaller, easier to care for home is their major source of funds. Plus up to $500,000.00 of it is tax free for married couples!
8. You get zero (0) tax credit for renting a home, while almost all of the money you spend on a mortgage is tax deductible for the first 10 to 15 years on a 30 year mortgage. Because of how mortgages are structured, in first 1/3 to 1/2 of the term you're paying off very little principal. Currently, all of the interest you're paying, plus in most cases the property taxes and hazard/flood insurance premiums can be tax deductible. Ask your accountant for more info.
7. Buying a home is almost always less exspensive than renting the same house. Why is this? Because your landlord needs to make a profit on their investment. So your rent payment is what they calculate they pay for their mortgage, including taxes and insurance, plus money for repairs and maintainence, PLUS their profit each month. This profit can be 20-30% of your rent payment or more! In addition, they also "earn" equity every year, as the value of their property increases, plus the amount of rent the local market allows them to charge usually increases as well.
6. You gain value through equity (appreciation) when buying your home, as the value of the house and property increases. Of course, if you are renting, your landlord gets this extra money when they eventually sell the property you helped them buy.
5. With the 80/20 and 95% financing plans some lenders offer, you can buy a home with very low or no down payment, just closing costs. Your bank or credit union may not offer 95-100% financing plans, but many lenders you can access through mortgage brokers do. If you qualify (which isn't as hard as you probably think) you can buy your home by paying only your closing costs. And if the home you find is worth $5000-$10,000 more than the asking price, you may be able to work with the seller to get them to pay all closing costs, while selling the house to you at its appraised value. You could own your home without any out of pocket expense!
4. Interest Only Mortgages can save you even more, and you still gain equity through appreciation! Interest only mortgages allow you to pay only the interest that accrues on your loan on a monthly basis. This reduces your out of pocket payment, and let's you finance a larger amount, since you usually only have to qualify for the smaller payment. They also usually have a cut off several years into the mortgage when you have to start paying on the principal. The idea is that you will either have moved by then (the average homeowner moves every 7 years) or else your income will have increased due to raises and/or a promotion. Of course, you always have the option of refinancing at that time as well. PLUS, you still gain equity during this time as your house gains in value through appreciation. In fact, the amount that appreciation adds to your equity is usually a much larger factor than the amount of principal you pay off in the first 10 years of a 30 year mortgage. For example, on a $180,000.00 mortgage, the first year you pay off about $1000.00 of principal with a 30 year mortgage, but with appreciation of just 3% (very conservative, most areas average 5% or more!), you gain $5400.00 in equity!
3. Adjustable Payment Plans can mean YOU choose what you pay each month. Some mortgage plans available through mortgage brokers let you pick from several payment options each month. Can you imagine your landlord allowing you to do that? A fairly common program is to offer 3 options;
-Paying a payment equal to a 15 year mortgage payment
-Paying a payment equal to a 30 year mortgage payment
-Paying a payment equal to an interest only mortgage payment
Some plans even offer a fourth option that is less than the interest only payment, and you only have to qualify for the lowest option! Then YOU pick which payment you want to make each month. This plan is especially good if you are a commissioned sales person or someone whose income varies quite a bit month to month.
2. You control what you do with your own home. You can do improvements to the existing house, add on a room or several, remodel or add a swimming pool, and YOU, not your landlord, benefit from these improvements! Any of these can increase your home's value, and you reap the benefits of a nicer home while you're there, and the extra profit when you sell. Plus, the ultimate control is that you have no lease to worry about. If you want to move, you put your house up for sale, sell it, and move. You don't have to stay the remanider of a year lease or pay any kind of fee. You decide where you want to live and for how long, and make a "moving bonus" when you do sell.
1. The number one reason to buy instead of rent is to SAVE the money you spend on housing, not THROW IT AWAY! Rent payments are just an expense, you pay "X" amount to have the right to live in a space for a certain amount of time. When you buy, a large portion of your payment is being "saved" in the value of your home. In fact, with interest rates currently so low, and appreciation in most areas in the 5-10% range or higher, you may even be "saving" more than you spend every month! For example, for a $180,000 mortgage your total payment, including taxes and interest, could be around $1300.00 a month($15,600 a year), and you'd pay off about $1000.00 in principal the first year. If that same property (valued at $200,000, we're assuming 10% down for this example) appreciates at only 8%, it would increase in value $16,000 the first year + the $1000 you paid off in principal, means you've put $17,000 in your "savings" account, and it only cost you $15,600 to do it! Plus, you have about $14,500 in tax deductions for your mortgage interest!
Stop wasting your money on Rent every month, start SAVING it in your own home TODAY.
Check out my other Top 10 Lists - They'll expalin why an ARM (adjustable rate mortgage) is usually a better deal, and why getting your mortgage through a licensed Mortgage Broker is usually a much better deal than your bank or credit union.
I'll send the next one of these soon.
posted by Jack @ Sunday, December 05, 2004
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