When you pay rent, you build equity in your landlord's property. When you pay a mortgage, you build equity in your own property. It's that simple. What's more, you can deduct interest from your mortgage and property tax payments on your income tax return.
To help evaluate the financial benefits of homeownership, we've crunched the numbers. The figures shown below represent a typical situation in the Madison area. (Figures are only meant to serve as an example and cannot be guaranteed due to varying lenders' charges, interest rates, personal taxes, property taxes, insurance, and appreciation.) But the difference is clear—home ownership has its benefits.
|Closing Costs and Fees||N/A||$0|
|Annual Insurance Premium||$120||$450|
|Rent/Monthly Principal & Interest||$1,100||$1,155|
|Monthly Deposit for Taxes||N/A||$440|
|Monthly Deposit for Insurance||$10||$38|
|Private Mortgage Insurance||N/A||$0|
|Total Monthly Payment||$1,110||$1,633|
|Income Tax Savings||N/A||$394|
|Monthly Payment After Taxes||$1,100||$1,259|
|Property Appreciation Per Month||$0||$600|
|Net Monthly Cost||$1,110||$659|
|Market Value After 1 Year||N/A||$247,200|
This example is based on a 30-day lock, 720 credit score. After-tax payments based on 25% tax bracket. Each person's financial circumstances will differ. Your actual tax savings may vary. Please consult a tax professional for guidance. This chart is an example. Interest and appreciation may vary pending market conditions.
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