Mon, 01 Sep 2008 18:24:00
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| Article by:
Pamela Lamarre and Tracy Dearman
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San Francisco, CA – Buying a home vs. renting is a big decision that takes careful consideration, as most mortgage consultants will agree. The rewards of home ownership are substantial. Despite the fact that there are both responsibilities and risks associated with owning a home, purchasing real estate has always been considered a profitable long term investment. It is an achievement that offers a sense of pride, financial stability, and potential tax advantages.
Landlords will often argue the benefits of renting, for obvious reason: if you are renting, you’re helping them make their mortgage payment. The numbers are staggering if you look at it this way. If you are paying $1,000 per month for an apartment, and you know your rent will increase 5 percent every year, then over the next five years you will pay your landlord $66,309. If you are currently renting a house, you may be paying much more than that each month. Either way, you gain no equity by shelling out this monthly housing expense and you certainly won’t benefit when the property value rises.
However, if you were to purchase your own home or condominium, you would be well on your way toward building equity within that same five-year period. By choosing a fixed-rate loan program, you can have the comfort of knowing that your monthly mortgage payment will never increase. In fact, you would have the option of refinancing to a lower interest rate at some point in the future should interest rates drop, and this would cause your monthly mortgage commitment to go down.
In addition to building equity, there are tax advantages that come into play with home ownership. Depending on your tax bracket, owning a home may be less expensive than renting after taxes. Interest payments on a mortgage below $1 million can be tax-deductible – check with your tax consultant so she or he can evaluate your individual situation.
To find the loan program that is right for you, your mortgage consultant will need to evaluate your monthly household income, current assets and savings, as well as any monthly obligations you may have for credit card payments, car payments, child support, and more. These prequalification factors, along with your credit score, will determine how much house you can afford and what interest rate you will pay for financing. It is also important to let your mortgage consultant know what your future goals are, because this will help narrow down the loan option which best fits your long-term needs.
Housing is an expense that takes a big bite out of the monthly budget. If you are a renter and feel that “home” is more than just a place to hang your hat, think about the long term advantages of purchasing real estate. It may be time to take that step to capitalize on today’s buyer’s market, build your personal net worth and help secure the financial future for you and your loved ones.
Pamela Lamarre and Tracy Dearman are business partners and head California State Funding Group and HSM realty finance management, respectively. For a free consultation or more information about the mortgage market, e-mail Pamela at plamarre@sbcglobal.net or Tracy at tdearman@hsmsf.com. Go to www.hsmsf.com for additional information.
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