Los Angeles

[Ed L.]

Despite the rate, it has to be priced right.  If you don't know what a deduction is , talk to a tax professional or spend hours on the internet.   If I bought a property 20 years ago with a 30 year fixed rate loan, then rented it out as I moved, in 10 more years when I don't have to pay a mortgage, I would get to pocket most of the rent. 

What will your rent be in 35 years? What wil your mortgage and taxes be in 35 years?  When you are retired do you want to be paying rent, or just your tax and maintenance?  The rent versus own is a math and lifestyle question.  Is the house that you buy today going to suit your needs for the next 30 years, maybe not.  Are you willing to be a landlord in the future?  Do you want a renter to pay the property tax, interest , and insurance , on a property, while you pay what is left.  The company which I work for helps many first time buyers like yourself, feel free to email or call

Edward Lopez

310-374-9000

edward@cbloans.com

NMLS ID 857151

This is not considered a commiment to lend.

[Cherie D.]

Takashi,

If you haven't had enough feedback already, I will just say duhhh.  The inflation rate (the devaluation of your dollar over time) normally averages around 3% ... so the bank is barely making anything above inflation AND tying up their money with you for 30 years.  Add to that the fact that all of your interest and closing costs are deductible items on your income taxes and you are probably coming out nearly even-steven, in terms of almost no real cost to you once all is said and done.

I can tell you that because of these homeowner perks my income taxes went down significantly after I became a homeowner.  And your monthly outlay is a fixed amount (though repairs to the house will be extra).  The apartment I was living in before I bought a house now rents for quite a bit more per month than is my mortgage payment.  And, from this point forward, your home purchase will undoubtedly appreciate in value.  If you can afford to buy and also take on the added stress of maintaining your own property, this is a no-brainer.

That first house of mine, purchased 10 years ago is now a rental and the tenant's rent pays the entire mortgage amount, utilities and repairs, plus provides me with a small amount of income.  And, as a landlord, all maintenance expenses are tax deductible. I am now in escrow to buy a second house which will also be made into a rental.  Yes, rates ARE a steal right now, as are prices, and you'd be a dummie not to jump in and grab your chance.

[Andrew W.]

Hi Takeshi,

While the additional $235,640 a lender would receive above what you borrow might seem excessive, there are a few additional factors to consider when analyzing why buying a house is better than renting:

1.  The amount of rent you would pay over the next 30 years will keep increasing, whereas your mortgage payments will remain fixed for that entire time.  Lets compare 30 years of fixed monthly mortgage payments of $1600 each vs. 30 years of rental payments starting at $1600 and increasing a conservative 1% per year.   The difference is about $92,000 in extra rental payments over the next 30 years. 

2. While your mortgage payments would be fixed, you would expect your income to keep pace with inflation over time.  This means you would be using a smaller and smaller percentage of rent towards housing over time with a mortgage.

3.  Next, your mortgage interest and property taxes are tax deductible.  The amount of these deductions beyond your current deduction (standard or itemized), multiplied by your tax rate, should give you a rough idea of the extra amount you will benefit from each year.  Consult a tax advisor on this.

4.  Hard assets like housing are a protection against inflation.  If you believe the Fed's money printing to cause an inflationary world the next 30 years, housing values will rise in tandem.

5. Finally, from a historical standpoint mortgage rates have never been lower.  Freddie Mac has an easy to understand chart on their website.  The 30 year fixed rate hit an all time high above 18% in 1981, and has trended downward to today's lows ever since.  We already know that rates will head back up in the coming years, as the Fed has already indicated they will raise rates as the economy recovers.  To put it shortly, rates will not be this low again in the next 30 years.

If you have any questions feel free to get in touch. 

andrew.worley@trufinance.com

Real Estate Broker-CA Dept of Real Estate 01822979

NMLS 462986

[Steve P.]

First)  That's if you keep the loan for 30 years.A low yield on any investment really. Risk of non-payment still a problem.

Second) Remeber, interest rates used to be above 10%. Not so long ago.

Third) Interest paid is tax deductable, rent is not for housing.

Forth) Property tax in tax deductable.

Fifth) Your Rent is paying for water, taxes, maint, just not for your asset.

Now, I own apt buildings. If I were single, I would rent in an area that is near a beach, drive what i wanted, and just enjoy not having to worry about earth quakes and other ownership problems. With kids, whole new ball game in living in units for me personally.