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NAME: Selena AGE: 26
Occupation:
Teacher
Selena
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Personal Stories
Selena's Story
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As I looked out over a 10-year period, owning a home held the prospect of becoming an even better deal. Using my projections, after 10 years, I would have almost $88,000 worth of equity built up in my home! That would work out to $540 per month less to own than to rent. And that didn’t even take into account potential income tax benefits from home ownership, like being able to deduct interest or property taxes. If I was to rent over this period, I wouldn’t have any of these benefits.

Now all I had to do was think about if I really could find the extra money each month for the next few years to make my dream come true.

Home Purchase

Renting

After 1 Year

Payments to Date

$ 26,182

$ 12,360

Loan Balance

$ 122,087

Home Value

$ 135,200

Mortgage Principal Payments

$ 1,413

Increase in fair market value of home @ 4% increase per year

$ 5,200

Equity in Home

$ 13,113 (10%)

After 2 Years:

Payments to Date

$ 41,674

$ 24,972

Loan Balance

$ 120,580

Home Value

$ 140,608

Mortgage Principal Payments

$ 2,920

Increase in fair market value of home@4% increase per year

$ 10,608

Equity in Home

$ 20,028 (14%)

After 10 Years

Payments to Date

$ 158,890

$ 135,599

Loan Balance

$ 104,368

Home Value

$ 192,432

Mortgage Principal Payments

$ 19,132

Increase in fair market value of home@ 4% increase per year

$ 62,432

Equity in Home

$ 88,064 (46%)

The chart above is an example of a potential financial benefit of home ownership and assumes an annual increase in the fair market value of the home of 4% and consistent, on-time mortgage payments. Even though home ownership is a common method to help build wealth, not all homes will increase in value.

Selena’s story is not a real-life account and is provided for illustrative purposes only. We hope this scenario emphasizes how using the information available in the H.O.M.E curriculum will help to make you a more informed and educated consumer when it comes time to obtain your home loan. The lender you choose will be able to discuss your specific circumstances and provide you with more detailed information about the home loan options available to you.

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