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Please call an accountant to get an exact calculation but as an estimate:
If your mortgage payment (interest & principle) is $3,000/month.
Approximately 80% of $3,000/month payment is interest = $2,400
Approximately 30% of the $2,400/month = $720 every month will be your interest deduction on your taxes which you will receive at the end of the year ($720 x 12= $8,400 for the year). Now essentially you will pay $3,000 - $720 = $2,280/month.
Also, the remaining $600/month of the original $3,000/month is paying down your principle. Essentially this $600 month you are paying yourself back as part of your loan, which allows you to build equity by paying down your mortgage by $600 every month. When you sell your condo your equity will be the appreciation minus what you paid down on your mortgage. This here is one of the main advantages of owning versus renting.
In essence, you will be paying $3,000 less $720(interest deduction) less principle reduction of $600/month =$1,680.
It will cost you $1,680 after factoring in all these factors.
If you compare this to renting: You would be paying $3,000/month or $2,000/month with none of these advantages. I think you receive some ridiculous low tax break of $300 for the year for renting.
There is no comparison between the two scenarios. Owning is the best way to build wealth.
Remember the are 3 main advantages to owning versus renting:
1. interest deductions
2. principle reductions
3. appreciation of property
If your condo appreciates to $580,000 in 5 years and you paid down your mortgage $20,000 to $480,000, the difference is your equity of $580,000-$480,000=$100,000.
You would have made $100,000 by owning and $0 by renting.
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Eric Glassoff
Coldwell Banker
1375 Beacon St.
Brookline, MA 02446
Tel: 617-233-6210
Fax: 617-796-8480
Email: Eric@BostonRealEstateExperts.com
Email: eric.glassoff@nemoves.com
Email: eglassoff@comcast.net
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