Don't throw away money each month: top 10 reasons to own versus rent
Reality check: we live in Southern California. Better yet, we live in San Diego County. Great weather, gorgeous destinations and a laid-back lifestyle all come at a hefty cost. The upside? Once you get your foot in the door by purchasing property, your hard-earned money is invested wisely versus thrown out the window each month.
While many of us have been renters at one point in our lives, there comes a time when you need to reevaluate the large sum of money you’re spending (aka burning through) each month in rent. It’s gone and will never, ever come back to you. Sometimes, a small starter home in a neighboring city is around the same cost as a condo a few miles from the ocean (I got into my first home for this very reason). Could a bit of smart budgeting per month make up the few hundred dollars you’d need to purchase a home? Here are my top 10 reasons to reconsider renting:
1. Live the Dream
Owning a home and movin’ on up in the world is part of the American Dream. Since San Diego is known as “the finest city in America,” that dream can be even better when you own your own share of the property pie in California.
Historically, housing and land values (especially in San Diego) have steadily increased over time. It’s a wise idea to get into the market and start investing in your financial future – the sooner the better. Plus, San Diego property is highly-desirable, making it more attractive to potential buyers if you decide to cash-in on your investment years later.
Remember how we discussed throwing away money each month in rent? Once you own a home, monthly payments will actually go toward equity in your home (some will go to interest on the mortgage as well). It’s smarter to invest in yourself than “donating” hard-earned money to your landlord's home equity and/or pocket.
4. Tax Incentives
When monthly mortgage payments are made, part of the payment goes toward interest, and another part of goes toward the balance of the loan (equity). When tax season arrives and you start the filing process, you may be able to deduct the amount of money spent on interest from your annual income, yielding a nice tax benefit. Be sure you to check with your local accountant or tax specialist for more information.
5. Current Low Interest Rates
Although interest rates are reported as slowly on the rise, they are still historically low. To put it in perspective, mortgage rates were around 13% 30 years ago. That’s more than double the percentage of recent rates! Also, current credit card rates are around 18%. This background information makes today’s 30-year mortgage locked in at a 5% interest rate look fantastic.
6. Leverage Equity
Once some equity is built up in your home (either through paying down the loan balance with monthly payments, putting a large amount down at time of purchase, or the home value rising over time) you may have the option to leverage that equity to finance other large purchases via a Home Equity Line Of Credit (HELOC). It is like a credit card, but with a much lower interest rate (typically around 4%-6%) and the collateral is your home. With a HELOC, you could have funds available for your child’s college education, a new car, family vacations or a home remodel.
7. Stability and Peace of Mind
When you own a home, there’s a great sense of stability and comfort in having an unwavering monthly payment. Also, there’s no landlord to possibly raise the rent or decide to sell the place you call home out from underneath you. The home is yours, and you are in control of what happens to it.
8. Pride of Ownership
You’re also in charge of the ambiance you create inside and outside of your home (unless you have a very strict HOA). Unlike renting, you can upgrade and change your home so it fits your personal style via remodeling, home additions, decorating, paint colors and more. Make it your own!
9. Easy Financing Options
Getting into a home can be easier than you think. In the past, lenders have required 20% as a down payment. Meaning, if the home price is $500,000 that would mean the down payment would have to be $100,000! However, there are now programs out there that can require as low as 3%-5% as a down payment, and some of that can be considered a gift from parents or family members. Don't get me wrong, it’s great if you have $100,000 saved up for a down payment, but with these programs, you may be able to save some of that down payment for upgrades to your new home or other moving expenses. Bottom line: being able to put only 3%-5% down and having monthly payments similar to rental payments, means owning a home may be easier than you think.
10. Financial Wealth
A large majority of wealth in the U.S. has been created through, or with the help of real estate. Purchasing a home is your first step to real estate wealth.
If you’re ready to make the switch from renter to home owner in Carlsbad, San Diego, Temecula or another California location, email or call Michael Biondo at 619-993-9559 to get the process started.