Renting vs Buying

Mike's Morning Mortgage Update
Renting vs. Buying

I hope you had a great weekend and you enjoyed a day off thanks to Dr. King's 89th birthday celebration.  He did a lot to shape the country and the world and made it a much better place for all of us to live.  I want to also wish my niece Abby Abraham a sweet 16 yesterday and my wife Kelly a happy 21st 29th birthday which is set to happen tomorrow.  There are no holidays planned for their birthdays, but you never know? 
Since the new tax laws passed, I have noticed that people are a little more hesitant to purchase a home because there is much less tax incentive.  That is a true statement and I can't argue that there is a lower tax incentive to purchase a home now vs. last year!  The good news is that I have yet to hear from any of my clients that they are selling because the tax write off shrunk or went away altogether.  That means that ownership is still alive and well, and yes, it may take a little push to get some people over the top, but I think they will all come around soon. 
Here is what I use to help motivate them to buy. Rents today, tomorrow and the future using 3% annual increase:
  • Rent today = $2000.00
  • 5 years = $2323.23
  • 10 years = $2698.71
  • 15 Years = $3134.86
  • 25 years = $4230.04
  • 30 years=  $4913.68
  • 35 years = $5707.82
(Total payments $1,531,338.00)Mortgage payment on $500K house today with 5% down - 3% annual increase in value
Payment today = $3159.42
  • 5 years $3222.50
  • 10 years $3292
  • 15 years $3369.00
  • 25 years $3547.00
  • 30 years $1092.73
  • 35 years $1207.55
(Total Payments 35 years = $1,269,444)Property value assuming 3% annual increase
  • 5 years $580,808.39
  • 10 years $$674,676.77
  • 15 years $783,715.86
  • 25 years $1,057,509.78
  • 30 years $1,228,421.11
  • 35 years $1,426,954.57
If you buy and live in the house for the next 35 years, you will have paid $1,269,444.00 in principal, interest, property taxes and insurance and you will have an asset that you own that is worth $1,426,954.57 assuming a 3% annual increase in value. 
If you rent, you will pay out $1,531,338.00 over the next 35 years.  You will have nothing to show for it except higher rent the next month.  The cost of renting vs. owning is $1,688,848.00.  The additional cost to rent vs. own is $48,252.80 per year for the next 35 years.  That is am average cost of $4021.07 per month!  If you are planning on living longer than 35 more years, then it will cost you even more to be a renter!  I am not considering tax advantages in the above and obviously things could change a bit! 
Here is one more thing to think of:  If the property values average a 4% increase over the next 35 years then your home will be worth $2,022,884.89 and if they go up by 5% then the property will be worth $2,866,859.21.  I think renting is stupid, but I have one vacancy in Hollywood on June Street.  It is a 1 bedroom and we are asking $2350.00 per month! 
Interest rates are still holding on, but a slight turn in the market could push them higher!  I hope these are helpful as your buyers are looking for property:
  • 30-year fixed conventional 1st Mortgage with 20% down - 4.125% (4.184 APR). Loan amounts up to $453,100.00 = $2195.95
  • 15-year fixed conventional 1st Mortgage with 20% - 3.625% (3.725 APR). Loan amounts up to $453,100.00 = $3267.02
  • 5/1 ARM 1st Mortgage -  20% down - Fixed for 5 years and then becomes variable - 3.750% -  (3.809 APR) Loan amounts up to $453,100.00 = $2098.38
  • 7/1 ARM 1st Mortgage - 20% Fixed for 7 years and then becomes variable - 3.875% - (3.931 APR) Loan amounts up to $453,100.00 = $2130.64
  • 10/1 ARM 1st Mortgage - 20% Fixed for 10 years and then becomes variable - 4.000% - (4.056 APR) Loan amounts up to $453,100.00 = $2163.17
  • 30-year fixed 1st Mortgage FHA loan 3.50% down - 3.750% (4.795 APR). Loan amounts up to $453,100.00 = $2135.10 + $326.56 PMI = $2461.66
  • 30-year fixed 1st Mortgage VA loan 0% - 3.750% (3.985 APR). Loan amounts up to $453,100.00 = $2098.38
  • 30-year fixed 1st Mortgage Jumbo loan 20% down - 4.250% (4.263 APR). Loan amounts up to $3,000,000.00 = $14,758.20
All of the above are based on a 740 credit score.  Rates are subject to change without notice, your mileage may vary! 
Have a great day and please let me know if you need me to speak with your clients on the reasons why they should buy!  Numbers don't lie and it is time for people to realize that renting is not smart!  My office line is 661-260-2970X2222 and my cell is 661-714-6258.   Have a great day and I hope to hear from you soon! 
 
Sincerely,
www.AugustaFinancial.com                                             www.MikeMeena.com
 
If the above box did not appear the rest of my info is below:

Mike Meena
Augusta Financial
25129 The Old Road, Suite 350, Santa Clarita, CA 91381
Phone  661-260-2970 Fax 661-554-7121
Email - Mike@AugustaFinancial.com




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