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I have lived in a rented apartment for some time, while contemplating whether to stay in this area long enough to buy a home. Some friends have been telling me that I could recuperate the mortgage paid for the house, if I sell it after 5 years and the value of the property has went up meanwhile.

But I am not sure if those friends have thought about the money paid for property taxes or property insurance while owning the home. In this case the property would be my main and only residence.

Is it possible that the increase in value of a private home is eaten by property taxes or property insurance? Meaning that the amount paid for these expenses while owning the home would be nearly equal to the increase in the value of the property?

(If it matters, I currently live in Florida and this is where I was thinking of buying the house.)

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    You have to pay property taxes and insurance no matter what. If you rent, the landlord will just factor those into your rent payment
    – Hilmar
    Commented Mar 31, 2022 at 0:38

2 Answers 2

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is it possible that the increase in value of a private home is eaten by property taxes or property insurance?

Yes of course it is possible that any profit from increase in house value is nullified by other costs. Increases in property value may not even happen. In 2008-2009 property prices fell in most of the US, so there was no increase to be 'eaten away".

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  • The OP is asking whether they can buy a property and expect it to essentially be "free" by getting back the amounts paid for mortgage and taxes when selling. I don't think your answer addresses this question in any helpful way.
    – littleadv
    Commented Mar 30, 2022 at 21:07
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    @littleadv Why not? If it's possible for there to be no value increase, it's certainly possible for the value increase to be less than property taxes or mortgage. I think the OP should be told that. Commented Mar 30, 2022 at 22:08
  • Exactly. My point is that by saying "yes of course it is possible" and then explaining when it hasn't happen you don't clearly explain to the OP why their premise is fundamentally wrong.
    – littleadv
    Commented Mar 30, 2022 at 22:34
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    I think you reversed the question. It asks "Is it possible that there is no profit". I say "yes" and give an example why. Commented Mar 30, 2022 at 23:50
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Some friends have been telling me that I could recuperate the mortgage paid for the house

You can't assume that you'd "recuperate" anything. No-one is going to pay you back the mortgage payments you made.

What you can do is make profit. If you bought your house for $X, and then sold it for $Y, then ($Y-$X) is your gain. That gain may be more or less than your expenses on the property while you owned it. That gain may be negative (i.e.: you'll lose money).

Mortgage payments have two components: principal (which builds your equity in the property) and interest (which is you paying the bank for the privilege of having access to the funds). The principal component is yours from the start, you're paying into your own equity. Interest is the cost of access to the funds.

Property taxes are usually assessed annually and are covering the services you're getting from your local government.

You'll have to pay property taxes even if the value of your property declines (the taxes are usually assessed as a function of the property values, not the property value deltas). Similarly you'll have to make mortgage payments even if the property value declines.

Neither your mortgage payments nor your taxes affect the sales price directly, it is not the buyers' problem. Indirectly they affect through the overall market conditions, but your house will not be more expensive or less to buy just because you had to pay mortgage interest. So no, you cannot "recuperate" anything.

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