Many people don’t realize how much of a benefit there is to being a homeowner. But the example below clearly shows just how quickly equity (the difference between the market value and what you owe) on a home can build up, whereas when you pay rent, you will never see that money again!
If you rent:
Your Monthly Rent $| Monthly Rent | Annual Rent | Equity | |
| 1st year | $1,900 | $22,800 | $0 |
| 2nd year | $1,995 | $23,940 | $0 |
| 3rd year | $2,095 | $25,140 | $0 |
| 4th year | $2,200 | $26,400 | $0 |
| 5th year | $2,310 | $27,720 | $0 |
Where did your rent, a 5-year total of $126,000 go? To your landlord!
If you own:
| End of: | Monthly Mortgage Payment* |
Value With Appreciation** |
Mortgage Balance*** |
Equity**** |
| 1st year | $1,610.46 | $420,465 | $295,573.90 | $124,891.10 |
| 2nd year | $1,610.46 | $441,977 | $290,921.36 | $151,055.64 |
| 3rd year | $1,610.46 | $464,589 | $286,030.78 | $178,588.22 |
| 4th year | $1,610.46 | $488,358 | $280,890.00 | $207,468.00 |
| 5th year | $1,610.46 | $513,343 | $275,486.20 | $237,856.80 |
After five years, you may realize $237,856 in equity if you purchase (plus received possible tax benefits), but when you rent, you will have poured $125,988 <calculation result> into your landlord’s pocket!
* Includes Principal and Interest only on a 5.00% mortgage with 20% down with a purchase price of $400,000
** Appreciation rate estimated at 5% annually on a $400,000 home. This is not a guarantee that your property purchase will appreciate at the same rate.
*** Based on the declining principal balance
**** Difference between what you owe and the possible market value of the example home based on 5% annual appreciation. This is not a guarantee that your property purchase will appreciate at the same rate.