Is owning a home still the American Dream?

Let's explore the “True Cost" of Home Onwership:,

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Using a $300,000 home in this example, let's take a look at the true cost of ownership. 

$300,000 Home assuming zero down. 

30-year term 

5% fixed rate 

$1,610.46 P&I 

However 

$2,967.13 is what you should factor in as your total monthly cost of homeownership! (Starting off) 

$300,000 Home assuming zero down. 

30-year term 

5% fixed rate 

$1,610.46 P&I 

$292.50 Property Tax 1.17% (3% Annual Increase) 

$151.67 Homeowners Insurance (3% Avg Annual Increase)

$312.20 PMI Insurance (No money was put down) 

$300 HOA Dues (3% Avg Annual Increase) 

$300 Average Maintenance Cost (3% Avg Annual Increase) 

Grand Total 

$2,967.13 Monthly 

Totals Breakdown 

1. $300,000 Total paid for principal 

2. $279,767 Total paid in Interest 

3. $86,587.26 Total paid for Homeowners Insurance 

4. $39,375.00 Total paid for PMI (drops off after around 10 years) 

5. $166,989.71 Total Paid for Property Tax 

6. $171,271.50 Total paid for HOA Fees 

7. $171,271.50 Total paid for out-of-pocket  maintenance costs.

Total 30-year out-of-pocket Home Ownership Costs 

$1,215,261.97 

We assumed the home would grow in value at an average of 3% in this scenario. 

After 30 years with an average growth of 3% the home would be worth... $728,178.74 

Total Cost Of Home Ownership Over 30 Years: 

$1,215,262.31 is the amount you will pay over 30 years to own a $300,000 home. 

After subtracting the principal amount of $300,000 from the total 30-year cost this amount equals $935,495.31. 

With many homeownership scenarios simply multiply the principal by 4 in order to figure out the total 30-year cost of ownership…. as you can see with this example, the numbers are slightly higher. 

After subtracting P&I $579,767 from the total 30 year cost this amount equals $635,495.31 

How would this scenario compare with renting?  

In this rent scenario I’ll use the same payment as the P&I calculation on a $300,000 home at 5%. 

Our rent payment is $1,610.46 

I'm going to subtract the rent payment over 30 years (P&I payment) from the total monies paid over 30 years.

$1,215,262.31 (Total Cost) - $579,767 (P&I) = Non-P&I payments equal to $635,495.31 
 

($1,765.26 a 30 year average of non P&I 30-year)30-year

If the non-P&I payments were invested over 30 years at 9.62% the 30-year ending balance on the investment would equal $3,741,723.74

I divided the non-P&I totals by 30 years and invested this amount over 30 years ($1,765.26 monthly for 30 years)

With the home ownership route, you would have paid $1,215,262.31 over 30 with a home value of .. $728,178.74 

The home is paid off however, you'll still continue to pay HOA fees, maintenance fees, taxes & insurance.

versus 

Renting for 30 years and investing the difference at 9.62% in order to have a total balance of almost 4 million, $3,741,723 to be exact.  
 

In scenario one, you paid $1,215.262 over 30 years to have a home worth $728,000, while in scenario 2 you paid $579,00, paying rent over 30 years, with almost 4 million in the bank. 

Click To View The Mortgage Calculator I Used 

I'll let you decide which scenario would work best for you! A home worth 700k after paying 1.2 million or paying 500k renting and investing the difference to have almost 4 million?

For educational purposes only!

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