Benefits of Home Ownership

Happiness, Home and Family

Let’s discuss how homeownership in the beautiful, alluring Poconos can provide you with an economic advantage. If you are considering purchasing residential real estate or a new home construction project in Pike, Wayne or Monroe Counties, PA, along with low taxes and getting more land and home for your money, following are a few of the addtional benefits about homeownership to consider.

In these hard times when the market has been affected by the impact of foreclosures in the marketplace, owners have been forced to lower home prices to compete with foreclosures.  It makes even more sense to buy than to rent, especially when factoring in today’s very low interest rates that are available!  How much can you afford?  Contact me about pre-qualification – it is easy and free!

Paying Rent vs. Paying a Mortgage:

Examples: A married couple who pay $900 per month in rent and a married couple who own their own home with a $200,000 mortgage:

Let’s assume both these married couples earn between $67,900 and $137,500 of taxable joint income, and they are taxed at a rate of 25%.

If renting, in order to earn $900 in net income to meet their rent payment, this household will have to generate $1200 of taxable income in order to pay $300 in taxes (25%) plus the $900 rent payment.

This couple’s $900 rent payment is actually $1200 of earned income (gross income), before taxes, to realize $900!

In contrast, is a married couple who own a home with a $200,000 mortgage loan at 6% interest fixed for 30 years, and their monthly payment is $1200 per month in principle and interest. Of that $1200 per month, in the first year $1000 per month is applied to interest, while $200 per month is applied to principle repayment.

Under typical circumstances, the interest portion of the payment is tax deductible (one should always consult with a tax professional to ensure eligibility). For every $1000 in interest expense, this couple will pay $250 less in taxes.

Therefore, this couple’s out-of-pocket expense for their mortgage payment is $950 per month initially.

To Rent or To Buy?

The Comparison – Questions to Consider:

What is more desirable – to be in an apartment paying $900 per month in rent, or being in a $200,000 plus home with a $950 net mortgage expense per month?

Is it better for the principle payment of a monthly loan repayment building equity in one’s own home, or having a landlord raise one’s rent each year while building his equity?

Watching your home increase in value over time is certainly more desirable than watching your landlord’s rental property increase in value over time! After 30 years of making rent payments, the wealth of one’s monthly rent payments adds up to 30 years worth of cancelled checks.

Living the American dream and owning your own property free and clear one day is only delayed by continuing to pay rent. One must consider that, over time, rents will continue to increase, as mortgage payments tend to remain quite stable. By owning a home, on average it will be the value of one’s home that will continue to increase, rather than the monthly payment!

If you agree with the logic above, please contact me to discover how you may achieve the dream of homeownership.

Building Wealth by Building Equity:

Building Your Equity!

Example: If a person purchases a home for $200,000, and assuming the home appreciates at a reasonable national average of 5% per year, the person will have accumulated $50,000 in equity in just 5 years!

If the $200,000 home was purchased with 3.5% down (a $7000 down payment), and the total closing costs were $8000, the total of the down payment and closing costs equals $15,000 (initial investment).

$50,000 (Equity over 5 years)
-15,000 (Initial investment)
$35,000 Total Earned

In this example, the homeowner has made $35,000 in just 5 years on a $15,000 investment – quite a return!

Leveraging:

Using the above example, let’s assume for a 30-year $200,000 mortgage, the down payment amount is $7000 and the amount borrowed from the bank is $193,000. Closing costs are $8000.

Your Profit!

Five years after purchasing the home, the owners sell the property for $270,000, using a modest average annual increase of 6% in the value of the property.

$270,000 (Selling price of home after 5 years)
-193,000 (Amount we will use, for ease, as the mortgage pay-off after 5 years. The pay-off will actually be less.)
$ 77,000 (Balance after the mortgage pay-off)
- 15,000 (Initial investment: down payment + closing costs)
$62,000
- 2,700 (1% Transfer Tax equaling one-half of 2% Transfer Tax in PA)
$59,300 Profit

In this example, the homeowners have used the bank’s money, totaling $193,000, as leverage, to earn $59,300 in profit on a personal investment of only $15,000!

Non-Financial Benefits:

Homeownership - Open the doorway to your bright future!

To all of this it can be added that home ownership results in non-financial benefits along with monetary returns – the pride and satisfaction of owning YOUR home!

It’s easy to get pre-qualified – and free!

If you will be requiring financing to assist you with your new home purchase, please contact me so I can provide you with information about mortgage professionals in the Poconos area who can assist you with pre-qualification for mortgage financing.

Government Agencies Available to Assist You in Becoming a Homeowner:

There are many programs available to assist people in their pursuit of homeownership, such as the ones listed here.

Housing and Urban Development (HUD) / Federal Housing Administration (FHA) is the Federal agency responsible for encouraging housing development and promoting homeownership. An FHA backed mortgage may be suitable for you.

U.S. Department of Veterans Affairs is the Federal agency responsible for Veteran’s Benefits / Home Loan Program

Pennsylvania’s Housing Finance Agency is the State agency to contact regarding its Keystone Home Loan programs, offering home purchase loans with low interest rates and fees that carry a fixed interest rate for 30 years. Eligible buyers may also qualify for a down payment and/or closing cost assistance loan.