Tax Advantages of Owning a Home Result in Savings

None of that $103,175 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 $110,000 (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:

You actually save $195 a month by owning your own home. On a yearly basis, the savings is even more dramatic:

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 $110,000 home. Unlike your rental unit, your home should appreciate over time. Assuming a 4.5 percent appreciation rate, your home will be worth $114,950 in the second year of ownership, $120,123 in the third year of your owning it, etc. After ten years, your $110,000 home will be worth $163,470. Not only do you earn a rate of return on your original purchase price, but you also get a return on any subsequent appreciation.

"Appreciating" Returns

Homeownership Builds Wealth for Households

The Federal Tax Reserve Board estimates that homeowners have a net worth almost 36 times more than that of renters. In 2001, the median net worth for homeowners was $171,700 compared to $4,800 for renters. How do you build up your net worth? Through those "appreciating returns" on your home.

We've already seen how your $110,000 home is worth $163,470 in ten years. In addition, you are paying down the principal on your mortgage. Remember that $100,000 you borrowed at 6.5 percent over 30 years - that debt amount is decreasing every month and every year.

Leslie Wilson Houston Real Estate Agent, Serving Houston and surrounding cities.

Houston Real Estate, Houston Home Value, Houston Homes and Houston Relocation: Houston Real Estate information, Houston Home Value and Houston homes are available on LeslieDWIlson.com, a site of Houston MLS. We display houses in Houston, Houston homes for sale, Houston open houses, Houston open houses and Houston open house listings, Houston home rentals, Houston home for lease and Houston homes for rent, Houston map search and Houston real estate map, Houston new homes, Houston foreclosed homes, Houston single family homes, Houston town homes, Houston condominiums, Houston lofts, Houston highrises, Houston multifamily homes, and Houston lands. In addition, to find Houston home value, Houston home prices, Houston house value, Houston home worth, Houston house prices, Houston property value, Houston home valuation, Houston property prices, Houston property value, Houston sold homes, Houston sold home prices, Houston real estate value, Houston home sales use Home Value Finder. In addition, we display Houston commercial properties, Houston commercial real estate information, international and world real estate, international listing and properties.

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