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Financial Facts: Renting can be hazardous to your wealth

Bob Kieber
Special to the Daily

For those of you who plan to make the High Country a temporary stop in your life there is no reason for you to read the rest of this article. For those of you who have plans to make the High Country home for years to come need to read this article at least twice.

Now, for those of you who plan to make the High Country home for any length of time you need to look at buying, not renting a home. This may sound very self-serving, considering that I help homebuyers obtain mortgages for those homes. But read on to see just the simple mathematics of home ownership versus home rental.

Take the case of Ms. Eileen Forward. She has made the decision to stay in the High Country for years and years. She loves the views, the lifestyle and all the various recreation options. She has also looked at renting a nice two to three bedroom condo so when friends and relatives visit they can stay with her. Ms. Forward has shopped the market and for the quality condo where she feels safe and has the amenities she wants the rent will run in the $1,500 to $1,700 range. On top of the rent she will have to pay the gas and electric bills, so she is planning on out of pocket costs of $2,000 each and every month. Plus, she knows that next year her rent may increase as it may do year after year.

In addition to her looking at rental condos, Ms. Eileen Forward has looked at the possibility of actually buying a condo. In her price range, based on what she was planning to pay for rent, she can afford to borrow as much as $250,000. And, at tax time she will be able to deduct over $16,800 out of her earned income thus reducing her federal income tax liability. Plus, her payment will not increase every year, as her rent may each year.

So let us review the finer points of home ownership. First of all you own and have pride of ownership. You then have tax deductions, the right to make improvements to the property and maybe even knock out a wall.

Finally as an owner you have a savings account that is growing every day and that is called appreciation. As home prices rise here in the High Country you can take advantage of the properties rise in value a couple of ways. One is when you sell the home you should receive a higher price than what you paid for the home. The other way is with home equity loan. Many home owners make improvements and pay the cost of those improvements by means of such an equity loan.

If you make a down payment of 20

percent on the home when you buy it and you sell it down the road you also get all of the appreciation on the entire home, not just 20 percent of the appreciation, so you get the appreciation on other peoples money.

So home ownership just may be the best way for you to go, especially if you plan to stay in the High Country. To learn more about mortgages and how home ownership can be a great investment feel free to contact me or other local mortgage professionals. And, as always, refer to your tax professional regarding tax benefits.

For answers to your mortgage related questions call Bob Kieber at (970) 485-1312 or email him at robertk@mymillenniumbank.com. Bob is a local mortgage lender with Millennium Bank. He has 30-plus years of professional experience in real estate, finance and investments, and is a longtime resident of the High Country.


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