Many people don’t realize how much of a benefit there is to being a homeowner. But the example below clearly shows just how quickly equity (the difference between the market value and what you owe) on a home can build up, whereas when you pay rent, you will never see that money again!
Monthly Rent*
Yearly Rent
Equity
1st Year
$2,500
$30,000
$0
2nd Year
$2,625
$31,500
$0
3rd Year
$2,756
$33,072
$0
4th Year
$2,894
$34,728
$0
5th Year
$3,039
$36,468
$0
If You Rent
End of:
Monthly Payment*
Value includes appreciation**
Mortgage balance***
Equity****
1st Year
$2,292
$600,000
$471,547
$128,453
2nd Year
$2,292
$630,000
$462,750
$167,250
3rd Year
$2,292
$661,500
$453,594
$207,906
4th Year
$2,292
$694,575
$444,065
$250,510
5th Year
$2,292
$729,304
$434,148
$295,156
If you own
After five years, you may realize $72,206 in equity if you purchase (plus received possible tax benefits), but when you rent, you will have poured $66,308 into your landlord’s pocket!
* Includes Principal and Interest only on a 4.00% mortgage with 20% down with a purchase price of $200,000 ** Appreciation rate estimated at 5% annually on a $200,000 home *** Based on the declining principal balance **** Difference between what you owe and the possible market value of the example home based on 5% annual appreciation.
