themarycoxteam.wordpress.com - Tenants

Building Equity

Owning a home is the first step to building equity. Tenants build equity but not for themselves; they build it for the owners.

Equity is the difference in the value of the home and what is owed on the home. There are two dynamics that cause this to grow: appreciation and principal reduction.

As the home increases in value, it is said to appreciate. Various authorities will annualize an appreciation rate based on average sales prices from one year to the next. Since appreciation is based on supply and demand as well as economic conditions, it will not be the same year after year.

If you looked at a ten to twelve-year period, some would be higher than others and there may even be some individual years that it is flat or even declined. For the…

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44 Times More Than a Renter

The Federal Reserve Board's Triennial Survey of Consumer Finances recently revealed the net worth of a homeowner was $231,400 compared to $5,200 for a renter. The net worth of homeowners increased 15% from 2013 to 2016 while renters' decreased by 5%.

Appreciation and principal reduction are the two dynamics that affect a homeowner's equity. Each payment is applied to the interest for the previous month and the principal reduction to retire the mortgage.

A $300,000 home purchased with a $294,566 FHA mortgage at 5% for 30 years has an average monthly principal reduction $362 in the first year. Two percent appreciation would benefit the buyer by $500 a month. In this example, the equity grows by $860 a month for the homeowner. A tenant would have…

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Surprise When Renting Your Home

Planning to go to the Masters next April 2-9th and don’t have a place to stay. Each year, there are homeowners who rent their home for a big premium during the Masters because hotels are in short supply and demand for private homes is up.

Homeowners go on vacation and make tax-free income while temporary tenants rent their home. Homeowners can benefit from a little known provision in the tax code that does not require taxpayers to recognize the income derived from renting their home for less than 15 days per year. See Plan Ahead for Tax Time When Renting Out Residential or Vacation Property- special rules.

This situation can particularly benefit homeowners where there are large sporting events nearby like golf and tennis tournaments, championship…

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Rent or Buy – You Pay for the House You Occupy!

The ironic thing about people who think they can’t afford to buy a home for themselves, end up buying the home for their landlord. There are several facts that support this notion.

Mortgages, whether held by an owner-occupant or an investor, are usually amortized so that each payment reduces the principal amount owed so that the loan will be repaid totally over the term. A tenant is inadvertently retiring the landlord’s mortgage with his monthly rent.

In most cases, the mortgage payment including taxes and insurance will be lower than the rent tenants are paying. Some experts are saying that we may never again experience the incredibly low mortgage interest rates currently available.

Renting precludes a person from enjoying the advantage a home…

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Your Tenants Will Send Your Kids to College

Parents, with children getting closer and closer to entering college, may also be feeling stress because they haven’t saved enough for tuition and other expenses. It’s estimated that the average cost for the 2015-16 school year is $32,405 for private colleges, $9,410 for state residents of public colleges and $23,893 for out-of-state residents.

If you started saving the year your child was born, you’d have to save $4,608 per year for 18 years at 5% to accumulate $129,620. If you waited until they were 10 years old, you’d have to save $13,574 per year to have the right amount. Saving enough can be difficult if you have a lot of time but if you only have a short time to meet your goals, it can seem impossible.

Student debt is one way to handle the…

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Real Cost of Housing

A variety of factors have led to a shortage of rental units, especially single family homes, and as a result, rents have been steadily increasing nationwide. In most markets, it is considerably less to own than to rent.

In some cases, the total house payment is less than the rent for a similar size and condition home which supports a purchase. However, when you factor in some of the financial benefits like principal reduction, appreciation and tax savings, the difference becomes even more dramatic.

Let’s look at an example of a $250,000 home with 3.5% down payment and a 4.50% mortgage for 30 years. We’ll assume a 3% annual appreciation, 25% federal tax bracket, $1,200 annual maintenance and current rent of $2,100 a month.

The total house payment…

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What’s Stopping You?

The majority of tenants say they’d like to own a home but continue to pay rent and missing out on financial and emotional advantages. There seems to still be a lot of misinformation in the marketplace. 

There are a number of programs for low or no down payment options. Veterans can get into a home with no down payment or closing costs. In qualifying areas, USDA has zero down payment programs. FHA requires 3.5% down payment and there are conventional programs for as little as 3% and 5% down.

People with credit issues need expert opinions about their specific situation. Borrowers with bankruptcies or foreclosures may be eligible to purchase again after certain periods of time. There are short-term fixes for some types of credit problems. There is an…

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