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When
you rent a house, the only real advantages you have are
that you are generally free of most maintenance
responsibilities, and that you are also free to change
houses whenever you want (depending on the terms of your
rental agreement).
The
problem with this is, that you are spending nearly as much
on rent as you would on repaying a loan, and at the end of
any given time frame, you have nothing to show for it.
| MONTHLY
RENT |
AFTER
10 YEARS |
AFTER
20 YEARS |
|
| $500 |
$77,641 |
$205,517 |
| $800 |
$124,226 |
$328,827 |
| $1,000 |
$155,282 |
$411,034 |
| $1,500 |
$232,923 |
$616,551 |
| $2,000 |
$310,565 |
$822,067 |
| $2,500 |
$388,206 |
$1,027,584 |
When
you buy a house, every payment you make contributes
toward your own asset ("equity" in your house).
Assuming you make all the mortgage payments, you will own
the house. The money you would have paid in rent and become
“dead” money, has been used to build an asset which can
usually be expected to become worth much more as time goes
on.
| MONTHLY
PURCHASE PAYMENT AMOUNT BY INTEREST RATE |
| LOAN |
5.0% |
5.5% |
6.0$ |
6.5% |
7.0% |
7.5% |
8.0% |
8.5% |
9.0% |
|
| $80,000 |
$429 |
$454 |
$480 |
$506 |
$532 |
$559 |
$587 |
$615 |
$644 |
| $100,000 |
$537 |
$568 |
$600 |
$632 |
$665 |
$699 |
$734 |
$769 |
$805 |
| $120,000 |
$644 |
$681 |
$719 |
$758 |
$798 |
$839 |
$881 |
$923 |
$966 |
| $140,000 |
$752 |
$795 |
$839 |
$885 |
$931 |
$979 |
$1,027 |
$1,076 |
$1,126 |
| $160,000 |
$859 |
$908 |
$959 |
$1,011 |
$1,064 |
$1,119 |
$1,174 |
$1,230 |
$1,287 |
| $180,000 |
$966 |
$1,022 |
$1,079 |
$1,138 |
$1,198 |
$1,259 |
$1,321 |
$1,384 |
$1,448 |
| $200,000 |
$1,074 |
$1,136 |
$1,199 |
$1,264 |
$1,331 |
$1,398 |
$1,468 |
$1,538 |
$1,609 |
| $220,000 |
$1,181 |
$1,249 |
$1,319 |
$1,391 |
$1,464 |
$1,538 |
$1,614 |
$1,692 |
$1,770 |
| $240,000 |
$1,288 |
$1,363 |
$1,439 |
$1,517 |
$1,597 |
$1,678 |
$1,761 |
$1,845 |
$1,931 |
By
renting, you lose the ability to build equity, take
advantage of tax benefits and protect yourself against rent
increases. Also, you may not be free to decorate without
permission and are literally at the mercy of the landlord
for your housing.
Owning
a home has many benefits. When you make a payment, you
are building equity- and that is an investment. Owning a
home also qualifies you for tax breaks which can help in
financing the upkeep in maintaining your home.
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