Owning Makes More Sense

When comparing the cost of owning a home to renting, there is more than the difference in house payment against the rent currently being paid. It very well could be lower than the rent but when you consider the other benefits, owning could be much lower than renting.

Each mortgage payment has an amount that is used to pay down the principal which is building equity for the owner. Similarly, the home appreciates over time which also benefits the owner by increasing their equity.

There are additional expenses for owning a home that renters don't have like repairs and possibly, a homeowner's association. To get a clear picture, look at the following example of a $300,000 home with a 3.5% down payment on a 4.5%, 30-year mortgage.

net cost of housing.jpg

The total payment is $2,264 including principal, interest, property taxes, property and mortgage insurance. However, when you consider the monthly principal reduction, appreciation, maintenance and HOA, the net cost of housing is $1,218. It costs $1,282 more to rent at $2,500 a month than to own. In a year's time, it would cost $15,000 more to rent than to own which is more than the down payment and closing costs to buy the home.

With normal amortization and 3% annual appreciation, the $10,500 down payment in this example turns into $112,00 in equity in seven years. Check out your own numbers using the Rent vs. Own or call me at (315) 761-5058. Owning a home makes sense and can be one of the best investments a person will ever make.

Comments

Cash-Out Refinance

With the rapid appreciation that homes have had in the last two years, most homeowners have equity. A common way to release part of the equity is to cash-out refinance but some homeowners may not be eligible currently. This type of loan replaces the current mortgage by paying it off and an additional amount of cash for the owner. Generally, lenders will consider a new mortgage up to a total of 80% of the current value. Typically, the rate on a cash-out refinance will be slightly higher than a traditional purchase money mortgage. As is in any lending situation, the rate depends on the borrower's credit and income. The best interest rates are available to borrowers with higher credit scores, usually over 740. Loan-to-value can affect the rate a borrower pays also. A 70% loan-to-value mortgage could be expected to have a lower interest rate than an 80% LTV because there is a larger amount of equity remaining in the property and therefore, less risk ...

Make Your Home Offer the Most Appealing

Sales in February 2023 were up 14.5% month over month and still down 22.6% year over year according to the NAR Housing Snapshot. The median sales price dipped 0.2% to $363,000 and there are 2.6 months supply of homes on the market compared to 1.7 months a year ago. "Inventory levels are still at historic lows, and consequently, multiple offers are returning on a good number of properties." According to Lawrence Yun, Chief Economist for the National Association of REALTORS�. It is still important to have a strategy for potentially competing with other buyers on the house you want to buy. The plan should include several available provisions and options, so that at the time of drafting the sales offer, you can consider exactly what to include based on the situation. Unless a person is paying cash, you need to be pre-approved by a trusted mortgage professional long before you start looking at homes. Include the written pre-approval letter along ...

Not Available for All Buyers

Lenders regularly publish mortgage rates but they may not be available for all buyers. Imagine that the mortgage payment based on an advertised rate influenced a buyer to make an offer on a home. After negotiating a binding contract, this buyer makes a loan application and finds out that for any number of possible reasons, that rate isn’t available. Even if the person does financially qualify for a loan at a higher interest rate, it will not be the payment that the buyer expected when the contract was negotiated. Lenders evaluate several factors such as the borrower’s credit score, debt-to-income and loan-to-value ratios. These variables are used to assess the risk associated with the repayment of the loan. While mortgage money is a commodity, it isn’t priced the same way items are that involve cash for goods. The lender puts up the money today based on a promise from the borrower to repay over a long term, possibly up to thirty years. The simple solution ...

Welcome to Chapin Real Estate Blog

Search This Blog