{"id":4004,"date":"2018-05-28T19:52:34","date_gmt":"2018-05-28T19:52:34","guid":{"rendered":"https:\/\/www.michaeladeery.com\/blog\/?p=4004"},"modified":"2018-05-28T20:09:03","modified_gmt":"2018-05-28T20:09:03","slug":"own-vs-rent-report-buy-a-650k-home-with-a-3400-payment-vs-rent-for-3400","status":"publish","type":"post","link":"https:\/\/www.michaeladeery.com\/blog\/own-vs-rent-report-buy-a-650k-home-with-a-3400-payment-vs-rent-for-3400\/","title":{"rendered":"Own vs Rent: Buy a $650k Home With a $3400 Payment vs Rent for $3400"},"content":{"rendered":"

Many people ask the question, “is it better to own or rent<\/strong>“? A good answer to that question is, “you are paying for housing whether you own or rent, so you should take advantage of the financial benefits of owning a home<\/strong>“. Instead of renting for $3,400 a month, a buyer can purchase a $650,000 home with 20% down for the same monthly payment. Check out the\u00a0“Own vs Rent 10 year Home Purchase Plan<\/strong>” I shared with a client this week that shows all the financial benefits that come with owning a home, vs renting for $3,400 a month.<\/p>\n

Financial Reasons to Buy a Home versus Rent<\/strong><\/span><\/p>\n

Here are some of the financial reasons to buy a home instead of rent.<\/p>\n

Homeowners get to take advantage of tax benefits and paying down the principal on their loan,\u00a0<\/strong>whereas renters help pay the landlords loan so he can take advantage of tax benefits and principal payments.<\/p>\n

<\/p>\n

When you own a home it is also a hedge against inflation.\u00a0<\/strong>\u00a0You 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 with inflation.<\/p>\n

Homeowners get to take advantage of the magic of appreciation.\u00a0<\/strong>Over time the value of a home will increase. If you bought a home anytime over the past 8 years, you have probably made some good appreciation on your home. Compare this to paying rent over the past 8 years.<\/p>\n

Compare Owning vs Renting for $3,400 a month<\/strong><\/span><\/p>\n

Here is a\u00a0“Own vs Rent 10 year Home Purchase Plan<\/strong>” I shared with a client this week, that shows the benefits of owning a home with a payment of $3,400 a month, versus renting for the same payment.<\/p>\n

You can also review this Own vs Rent report online at\u00a0https:\/\/mcedge.tv\/1cb5pl<\/span><\/a><\/strong><\/p>\n

With a $3,400 payment, the buyers can\u00a0purchase a $650,000 home with 20% down.<\/strong><\/p>\n

<\/p>\n

On the left column is the $3,400 in monthly rent.<\/p>\n

On the right column, is the $650,000 home purchase with a down payment of 20% with conventional jumbo financing, with an interest rate of 4.625%. The total PITI payment is $3,398 a month, which includes principal and interest, property taxes and homeowners insurance.<\/strong><\/p>\n

As you can see above, the owner will get\u00a0tax benefits of $923 a month, and pay down principal of $669 on the loan,<\/strong>\u00a0versus no financial benefits from writing a check for $3,400 in rent every month.<\/p>\n

Compare Principal Paid vs Rent Paid over 10 years<\/strong><\/span><\/p>\n

In this section of the report,\u00a0it compares how much rent versus principal is paid over the next 10 years.<\/strong><\/p>\n

<\/p>\n

The owner will have paid down the principal on the loan by $101,881\u00a0<\/strong>over the next 10 years.<\/p>\n

Compare this to\u00a0paying $467,726 in rent over the next 10 years<\/strong>\u00a0to the landlord.<\/p>\n

Compare Net Worth in 10 years<\/strong><\/span><\/p>\n

In this section of the report, it compares the net worth after 10 years of owning a home versus renting.<\/p>\n

<\/p>\n

The owner will accumulate a net worth of $455,427 over the next 10 years,\u00a0<\/strong>by paying down the principal on the loan, tax benefits, and accumulated equity gains due to appreciation on the property.\u00a0\u00a0<\/strong>In this example I used a conservative 3% annual appreciation rate.<\/p>\n

There are no financial benefits to paying rent over the next 10 years.<\/p>\n

The Impact of Rising Rates on Buyer Purchasing Power<\/strong><\/span><\/p>\n

As interest rates have continued to rise recently, a question that many renters and buyers are asking is,\u00a0\u201cIf rates rise how will this affect my affordability?\u201d<\/em><\/strong><\/p>\n

Here is a chart that shows the \u201cimpact of rising rates on a buyers purchasing power or affordability\u201d.<\/p>\n

As you can see below on the chart,\u00a0if rates just increase by 1%, from current levels of 4.5% to 5.5%, a buyer will lose 10.75% in purchasing power<\/strong>.<\/p>\n

This means, if a buyer can afford to purchase $600k today, but rates increase by 1%, they will only be able to afford $535,500 using the same monthly payment.<\/p>\n

<\/p>\n

If a buyer can afford to purchase $800k today, but rates increase by 1%, they will only be able to afford $714,000 using the same monthly payment.<\/p>\n

If a buyer can afford to purchase $1,000,000 today, but rates increase by 1%, they will only be able to afford $892,500 using the same monthly payment.<\/p>\n

<\/p>\n

It is still a good time to buy a home<\/strong><\/span><\/p>\n

It’s still a good time to purchase a home, especially as the cost of borrowing money with today’s interest rates is still very low historically.\u00a0The average 30-year fixed rate over the past decade was 6.7% and 8.9% over the past 30 years.<\/strong><\/p>\n

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, buying a home is a better financial decision.<\/p>\n

It is important that buyers are given all the information they need so they can make an informed decision about buying a home. Buyers love these “Own vs Rent Reports”<\/strong>above, because it shows them all the financial benefits and different figures they need to see when making the decision to purchase a home.<\/p>\n

If you would like to review one of these “Rent vs Own Reports”<\/strong>\u00a0like this example above, please contact me directly at 858-442-2686. I look forward to chatting soon.<\/p>\n

P.S.<\/strong>\u00a0If you would like to be updated faster on any important industry news or new loan programs that come out, please join my\u00a0Facebook Page<\/strong><\/a>.<\/strong><\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

Many people ask the question, “is it better to own or rent“? A good answer to that question is, “you are paying for housing whether you own or rent, so you should take advantage of the financial benefits of owning a home“. Instead of renting for $3,400 a month, a buyer can purchase a $650,000 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,785],"tags":[783,781,782,780],"class_list":["post-4004","post","type-post","status-publish","format-standard","hentry","category-michaels-housing-and-market-updates","category-own-vs-rent-buy-a-650k-home-with-a-3400-payment-vs-rent-for-3400","tag-400-a-month-instead-of-rent","tag-better-to-own-vs-rent","tag-own-for-3","tag-own-vs-rent"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/posts\/4004","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/comments?post=4004"}],"version-history":[{"count":6,"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/posts\/4004\/revisions"}],"predecessor-version":[{"id":4011,"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/posts\/4004\/revisions\/4011"}],"wp:attachment":[{"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/media?parent=4004"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/categories?post=4004"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.michaeladeery.com\/blog\/wp-json\/wp\/v2\/tags?post=4004"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}