Friday, September 21, 2012

Should you Rent or Buy a Home in 2012

Should you Rent or Buy a Home in 2012?

Should you Rent or Buy a Home? Last year at this time I wrote about weather you "should Rent or Buy a Home" (see blog below) Here is the Update One year later. It is cheaper to pay rent on a single family home or pay a mortgage on a single family home? Rental rates have gone up so, yes Buy if you can.
This article compares the average monthly rent paid for a rental compared to how much the mortgage payment might be to purchase an average priced single family home in greater Phoenix area.

The average single family Home rental rate is $1,850 and average single family purchase price is now $218,000.00 as of September 1, 2012 for Greater Phoenix. (This information is available from Arizona Regional Multiple Listing Service, Inc.) (2100Sqft. Home, 3-4 Bedrooms, 2-3 baths, with 2 car garage, with or without a pool.)

Now, if we look at a FHA 3.5% down loan, fixed rate of 3.259% for 30yrs at a purchase price of $218,000 the monthly payment with principle, interest and mortgage insurance (M.I.P.), would be $1094. Granted, we have to consider taxes and homeowners insurance; additional cost of 285.00 to $1094.00 = $1,379.00 That’s a savings of $471.00 per month, and a total savings of $5,652.00 per year. What could you do with an extra $5,652.00 per year? Now how do you feel about “Should you Rent or Buy a Single Family Home?”

One benefit of owning is tax deductions. If a home owner itemizes on their federal tax return they may take a tax deduction for the annual mortgage interest paid and annual property taxes paid.

Possible Tax deduction for above scenario

$6,829.00 mortgage interest paid first year on loan, plus $2616.00 in property taxes paid the first year=$9,445.00 x 25% federal tax rate=$2,361.25 tax deduction.

(The actual tax rate will vary according to the owner’s income and is only an estimate for this scenario.)
$2,361.25 may be deducted from federal taxes.
$2,361.25 divided by twelve months is $196.77
$1,182.23 Effective monthly mortgage payment if owner itemizes and able to take deductions.
                 $1,379-196.77 = 1,182.23


$667.77 Less than paying $1,850.00 in rent.
You can also think of it this way over 5 years of paying rent $1850 x 60 months = $111,000 and you own nothing.

Where as $111,000 is used towards Home Ownership



Should you Rent or Buy a Home?

While there are many reasons to rent or buy; this article compares the average monthly rental amount paid for a single family home in Greater Phoenix compared to the amount of a monthly mortgage payment using a scenario to purchase the average priced single family home in Greater Phoenix. If analyzed only by the amount of the monthly payment buying trumps renting in the example given.

If you’re thinking about buying or renting, please call me for more information.

"Opening The Door To Opportunity and Your Future Home..."

Thank you
Joseph D'Ambrosio
Joseph D'Ambrosio Cell: 623-810-4824
Executive Sales Associate
Keller Williams Integrity First Realty

No comments:

Post a Comment