Our Blogs

Archive for the ‘Own vs Rent for $3600 a Month: Buy a $600k Home With 5% Down and No PMI’ Category

Own vs Rent for $3600 a Month: Buy a $600k Home With 5% Down and No PMI Saturday, February 10th, 2018

Instead of renting for $3,600 a month, did you know you can purchase a $600,000 home with only 5% down with No monthly mortgage Insurance “PMI” for the same monthly payment. When you factor in all the financial benefits and tax deductions you get to take advantage of when you own a home, it is cheaper to own a home versus rent in many parts of California. Check out the “Own vs Rent” report below comparing renting versus owning for $3,600 a month.

Compare Owning vs Renting for $3,600 a month

There are many renters in California paying monthly rent around $3,600. What many renters don’t know is, how much home they can purchase for the same monthly payment.

Instead of paying $3,600 a month in rent to your landlord, did you know you can purchase a $600,000 home with only 5% down conventional jumbo financing with No monthly mortgage insurance “PMI”, for the same total monthly payment.

Check out this “Rent vs Own” report below comparing renting versus owning for $3,600 a month.

On the left column is the $3,600 in monthly rent.

On the right column, for the same monthly payment of $3,600 a month, you can buy a $600,000 home with a down payment of 5% using conventional jumbo financing, with an interest rate of 4.625% with NO monthly PMI. The total PITI payment is $3,600 a month, which includes principal and interest, property taxes and homeowners insurance.

As you can see above when owning a home, $733 a month will go towards paying down the principal on the loan. You will also get to claim tax benefits of $978 a month. Both of amount to $1,712 a month in total benefits.

Compare this to zero tax benefits when paying rent of $3,600 every month.

Compare Principal Paid vs Rent over 10 years

In this section of the report, it compares how much rent versus principal you will pay over the next 10 years.

By owning a home, you will have paid down the principal on your loan by $111,677 over the next 10 years.

Compare this to paying $495,240 in rent over the next 10 years with no financial benefits.

Tax Benefit Analysis Over Next 10 years

As you can see below, when owning a home you will be able to claim tax benefits of $978 a month. Over 10 years the tax benefits amount to $109,198.

When paying rent of $3,600 a month, there are No tax benefits.

Compare Net Worth in 10 years

In this section of the report, it compares your net worth after 10 years of owning a home versus renting.

By owning a home, you will accumulate a net worth of $348,027 over the next 10 years, from the financial benefits of home ownership.

The 3 main financial benefits to owning a home are, paying down the principal on the loan, tax deductions, and accumulated equity gains due to appreciation on the property. In this example I used a conservative 3% annual appreciation rate.

Whereas with renting over the next 10 years, you will have a zero net worth, as there are no financial benefits to paying rent.

Click HERE for more information on how to qualify for this loan program above, the 5% down conventional jumbo loan program with No monthly mortgage insurance “PMI”. There is also a Q&A section in the article too.

The Impact of Rising Rates on Buyer Purchasing Power in 2018

As rates have already increased over “.5” since the New Tax Bill was passed in December, it is important that buyers understand that rising mortgage rates do more to influence their home affordability than rising home prices.

Here is a good chart below to share with home buyers. It shows the “impact of rising rates on a buyers purchasing power or affordability”.

Current jumbo rates today are around 4.5% on a 30 year fixed.  If a buyer can afford $600k at a rate of 4.5% today, but rates increase by another 1%, the buyer can only afford $535,500, a loss of 10.75% in affordability.

Based on how rates are currently trading, it looks like mortgage rates may be moving towards 5% over the next several months.

Why Now is still a great time to buy a home

It’s still a great time to purchase a home, especially as the cost of borrowing money is still very low historically. The average 30-year fixed rate over the past decade was 6.7% and over 8% over the past 20 years.

When you crunch the numbers and weigh up all the financial benefits that come with home ownership, and compare it to what you are paying in rent, you will be surprised how much home you can actually afford to buy in many cases.

A good idea is to talk to your accountant and ask them what the mortgage interest deduction and deduction for real estate taxes will do for your income, you will probably find it is now cheaper to own than to rent in many areas.

Remember too, when you own a home, it is also a hedge against inflation for the future too. When you own a home, you will get a low fixed rate mortgage and your principal and interest payment will never change. Whereas rent will continue to go up over time.

In this market, it is important that buyers are been given all the information they need so they can make an informed decision about buying a home. These “Rent vs Own” reports are a great tool for buyers to review, because it shows them all the financial benefits and different figures they need to see when making the decision to purchase a home.

If you would like more information on the “Rent vs Own” report like this example above, please contact me directly at 858-442-2686. I look forward to chatting soon.

P.S. If you would like to be updated faster on any important industry news or new loan programs that come out, please join my Facebook Page.