The decision, not always easy, calls for professional guidance

Analysis Tells You Which Door to Pick: Rent or Buy

One of the top financial decisions we face is rent vs. buy. For many, this decision is made once in a lifetime. Renters who become homeowners tend to continue as homeowners for years if not for the balance of their lives.

An early 2015 decision by the Obama administration cut federal loan program fees charged to first-time home buyers is encouraging thousands of renters to explore buying at a time of declining interest rates.

house10For many, the rent or buy decision will be revisited several times as we age, work and nurture our families. Compared to buying, renting is relatively easy and straightforward, cost-wise. Many factors – including several not usually considered – play into the process. At CALIFORNIA MORTGAGE ADVISORS, INC., we’ve tapped into our experience to help consumers ease the decision. At no cost, we can help you answer the question:

Is it better to rent or buy?

When you sit down with our licensed, trained professionals, these are the questions that will ultimately lead to a solid, durable decision:

  • What phase of life are you in? Young individuals, couples and mid-lifers have much different financial profiles and motivations than seniors who may find renting attractive for maintenance, health or financial reasons.
  • What is the price range of appropriate housing? Normally not considered a rental question, price range is important because property value determines rental value. For example, if you can afford $2,500/month for rent or a mortgage payment, which is best for your specific, unique situation? Our objective is to establish an apples-to-apples comparative relationship between housing suitable for rental and purchase
  • What is the length of time you currently plan to remain in the selected housing? Long residency helps spread buying costs over many years
  • Given your credit and employment history, plus your ability to make a down payment, what are your anticipated ownership costs including mortgage payments and tax deductions?
  • What is your current consumer debt? Do you need to substantially increase it soon?
  • If you live in a metropolitan area with a history of rising home values and declining affordability (several regions in California), what is the impact if you rent close-in but only buy at a substantial distance from work?
  • Let’s take a look at possible future scenarios. Predicting the future is hard, of course. But some facts are knowable and workable.
    • What will you do with down payment money if you decide to rent?
    • Is it possible that you’ll receive a substantial inheritance down the road?
    • Are you a pet owner now or plan to become one?
  • Lifestyle may play a role. Are you or a family member anxious to begin a serious garden? Or do you need space for a hobby or side business?
  • What kind and amount of closing costs do you face if you buy?
  • Home ownership is festooned with expenses, many of them routine (e.g., maintenance). But some costs can shock owners. They can be sudden and expensive (such as the failure of a central air conditioning system or soil subsidence that jeopardizes the foundation). Renters don’t directly pay these costs. What is your tolerance for expected and unexpected expenses?
  • How do you feel about maintenance that you perform yourself (seniors have been known to sell and rent because they can no longer handle home maintenance, preferring to call the landlord to fix a broken toilet or bulky oven)?
  • Will you face added rental costs and fees, such as HOA dues, broker fees and the “opportunity cost” of a large security deposit?
  • What is the history of local rent increases in general and specifically for housing you might be considering?

Calculating a Rent vs. Buy Decision Together

Helping select the best door to open is our job at CALIFORNIA MORTGAGE ADVISORS, INC. We’ll sit down at no charge and work through these questions together. Our time-tested “calculator” approach will lead you to the best door (or doors). It may turn out that renting is the best decision now; and, if you are able grow your down payment, buying may be the best decision a few years from now.

California Mortgage Advisors Inc. has been helping customers purchase the home of their dream for over 20 years. We understand not every borrower is looking for the same home or the same type of loan. Our Mortgage Advisors can assist customers in selecting the best loan for their first home purchase, second home purchase, or refinance. When you are ready to start the process contact one of our Mortgage Advisors at (800) 927-6560.