Advantages of Buying :. NC Pittsboro: Cindy Brudvik Davis - RE/MAX Southern Advantage Pittsboro, Chatham County NC, Pittsboro NC

Why Rent When You Can Buy a Home?

Are you unsure about becoming a homeowner? Thinking that you can't afford to buy a home? Are you worried about whether buying a home in Pittsboro, Chatham County, or the NC Triangle is a good investment?

Buying a first home can be an intimidating process. But the first step is making those first decisions:

I want to own my own home
I can afford to own my own home
Owning my own home makes sense for me financially and emotionally

If you are still struggling with those first decisions, here are some facts that might help you make that first step toward becoming a homeowner.

You can't afford NOT to buy a home!

Over the last ten years, the cost of rental housing in the U.S. has increased an average of 3 percent per year. That means than an apartment or home renting for $1,000 per month will cost more than $1,300 a month in ten years. If you rent the same home for ten years, the total amount you would pay for rent will equal $137,567!

Total Rent Paid Over Ten Years $137,567
Year	Monthly Rent (avg. increase 3% per year)	Total Annual Rent
1	$1,000	$12,000
2	$1,030	12,360
3	1,061	12,731
4	1,093	13,113
5	1,126	13,506
6	1,159	13,911
7	1,194	14,329
8	1,230	14,758
9	1,267	15,201
10	1,305	15,657

Tax Advantages of Owning a Home Result in Savings

None of that $137,567 is returned to you, either through savings or as an investment. Homeownership, on the other hand, has tax advantages over renting a home, and those advantages can help you save money. Unlike your monthly rent, part of your monthly mortgage payment "comes back to you" in tax savings. Here's an example:

You purchase a home that costs $210,000. Your down payment is $10,000 (plus closing costs - expenses incurred to actually process the transaction). You finance the balance with a 30-year fixed rate mortgage at 6.5 percent interest. Your monthly payments (not including utilities, maintenance, insurance, etc.) are:

Monthly Mortgage and Tax Payments
- Mortgage	$1,264
- Property tax (@1.25% tax rate*)	230
Total Monthly Payment	$1,494
Tax savings per month (assuming a 30% income tax bracket):
- Mortgage interest tax deduction	$322
- Tax deduction for property tax	68
Total Monthly Tax Savings	$390
Total Monthly Cost After Tax Savings	$1,104

*property tax rates vary by city and county

You actually save $390 a month by owning your own home. On a yearly basis, the savings is even more dramatic:

Total Annual Costs
	Homeowner	Renter
Annual mortgage/rental payment	$15,168	$12,000
Real estate taxes	2,760	0
Mortgage interest tax deduction	-3,864	0
Tax deduction for property tax	-816	0
Mortgage principal accumulation	-2,232	0
Appreciation*	-9,450	0
Total Annual Cost	$1,566	$12,000

*Based on 4.5% annual appreciation rate, from the NATIONAL ASSOCIATION OF REALTORS Median Sales Price data series

Homeownership is a Good Investment

For the majority of Americans, their home is their largest financial asset and a major player in their investment portfolio. It's a good thing, too, since stock market value has declined since 1998, while home price appreciation has increased. The NATIONAL ASSOCIATION OF REALTORS estimates that home value rises, on average, by 4.5 percent a year. That's a steady return on investment; one's own home is a much less volatile asset than stocks, bonds or mutual funds.

As an example, let's look again at that $210,000 home. Unlike your rental unit, your home should appreciate over time. Assuming a 4.5 percent appreciation rate*, your home will be worth $219,450 in the second year of ownership, $229,325 in the third year of your owning it, etc. After ten years, your $210,000 home will be worth $312,080. Not only do you earn a rate of return on your original purchase price, but you also get a return on any subsequent appreciation.

*Average price appreciation from 1970 to 2005 was 6.7%

"Appreciating Returns"

Total Appreciation After Ten Years
Year	Home Value	Yearly Appreciation
1	$210,000	$9,450
2	219,450	9,875
3	229,325	10,320
4	239,645	10,784
5	250,429	11,269
6	261,698	11,776
7	273,475	12,306
8	285,781	12,860
9	298,641	13,439
10	312,080	14,044
	Total:	$116,124

Homeownership Builds Wealth for Households

The Federal Reserve Board estimates that homeowners have a net worth almost 36 times more than that of renters. In 2004, the median net worth for homeowners was $184,400 compared to $4,000 for renters. How do you build up your net worth? Through those "appreciating returns" on your home.

We've already seen how your $210,000 home is worth $312,080 in ten years. In addition, you are paying down the principal on your mortgage. Remember that $200,000 you borrowed at 6.5 percent over 30 years - that debt amount is decreasing every month and every year.

Year	Home Value	Mortgage Debt	Net Worth
1	$210,000	$200,000	$10,000
2	219,450	197,765	21,685
3	229,325	195,379	33,946
4	239,645	192,834	46,810
5	250,429	190,119	60,310
6	261,698	187,222	74,476
7	273,475	184,131	89,344
8	285,781	180,832	104,948
9	298,641	177,313	121,328
10	312,080	173,559	138,521

After the first year, you now only owe $197,765 on a home that is worth $219,450. You have "netted" a $9,450 increase in the value of your home, plus $2,235 a year that previously you owed as part of your mortgage debt. As your debt decreases and the home value increases, you accumulate wealth from the value of your home. In addition, over this ten-year period, you will have a significantly lower after-tax payment for housing. Each year as your home appreciates and you continue to pay down your mortgage debt, you increase your own net worth.

Homeownership - It's NOT Just About Money

The "numbers tell the story" should ease your mind about the financial aspects of becoming a homeowner. But there are other, less monetary, benefits to homeownership. Several research studies indicate homeownership adds to the value of communities, has positive effects on children, and even contributes to increased voter participation rates.

Cindy Brudvik Davis, RE/MAX Southern Advantage, a full service real estate agent in Pittsboro, Chatham County, will work on your behalf to actualize your real estate and home ownership goals in the following NC Triangle towns and communities:

Apex (Chatham and Wake Counties)

Carrboro (Orange County)

Cary (Chatham and Wake Counties)

Chapel Hill (Chatham and Orange Counties)

Fearrington Village (Pittsboro in NE Chatham County)

Governor's Club (Chapel Hill, Chatham County)

Graham (Southern Alamance County)

Holly Springs (Wake County)

Morrisville (Wake County)

Pittsboro (Chatham County)

Raleigh and North Raleigh (Wake County)

RTP (Research Triangle Park)