The document compares the financial considerations of renting versus buying a home. Key factors in the decision include location, anticipated length of stay, and budget. Buying a home offers tax benefits like deducting mortgage interest and property taxes. It also allows building equity over time as the home appreciates in value. However, buying requires a larger initial investment for a down payment and closing costs. The document uses an example in Centreville, VA to show how buying could save over $16,000 per year compared to renting after accounting for tax benefits and home appreciation. It provides resources for calculating the rent vs buy analysis and describes various loan programs like FHA that offer lower down payment options.

1. The Power of Purchase Renting vs. Buying

2. How do you know if it is better to rent or to purchase a home? Key considerations: Location How long do you think you will be in the area? How long do you think you would be in the home? Budget

3. People buy a home for some of the following reasons Anticipated Appreciation : ~5%/year (NoVA area) Tax benefits : Mortgage Interest deduction The government allows you to deduct a portion of the interest you pay on your mortgage from you income taxes Property Tax Deductions – Real estate taxes are tax deductible on primary residence Mortgage Insurance Deductions – If you pay mortgage insurance you can currently deduct the mortgage insurance from your taxes on borrowers earning $100,000 or less/year Capital Gains Exclusion – The government allows you to exclude up to $250k (single person) or $500k (married couple) of profit from capital gains tax as long as you live in your home at least 2 out of the past 5 yrs. Pride of Ownership : can customize home and make it yours Sense of Security Equity Lines : ability to tap into your equity (pay off credit card debt, college, renovations, anything)

4. People decide against renting for some of these reasons “ At the mercy of your landlord” Landlord can raise your rent Landlord can kick you out Landlord can take a long time to make necessary repairs Security Deposit Rental Insurance Breaking a lease penalties Lost Opportunity

5. How much lost opportunity? Consider this scenario $280,000 valued house in Centreville By buying instead of renting, this individual saves: ~$16,680/yr Rent Buy Monthly payment: $1,800/mo Initial outlay: ~$3,600 (Security Deposit/1 mo rent & 1 mo security deposit ) Monthly Payment: $1,950/mo* Initial outlay: $9,800 (eg. FHA 3.5% down payment on 280,000 house @ interest rate 4.75%)

6. Proof Bottom Line: Consideration Impact Effective Monthly Payment Monthly payment P&I: $1,423 Taxes: $233 MI: $204 Insur: $40 HOA: $50 $1,950/mo Tax savings on interest paid $270/mo (25% tax bracket) $1,950 - $270 = $1,680 Monthly mortgage payments towards principal $345/mo $1,680 - $345 = $1,335 5% appreciation/year* $1,150/mo (280,000*5%)/12 $1,335 - $1,150 = $185 Feels like $185/mo Renting $1,800/mo Buying (after considerations): $185/mo

7. Historic Northern VA annual appreciation The price of existing homes increased by 5.4% annually from 1968 to 2009, on average. (Source: NVAR)

8. Resources Calculators are available online New York Times website: Realtor.com Others Source: www.nytimes.com/interactive/business/buy-rent-calculator.html

9. Programs FHA - Loan program to assist homebuyers in acquiring property with small down payments from gov’t agency (Federal Housing Administration) [3.5% down payment] VHDA FHA PLUS - designed to help low to moderate income families obtain affordable financing. [up to 101.5% financing] VA - Feature designed to provide housing and assistance for veterans and their families as established by the GI Bill. [100% financing] Conventional - Any mortgage that is not insured or guaranteed by the federal, state, or local gov’ts

10. Questions?