Mike’s Mid Day Mortgage Update

Stop Your Buyers from Saying “I’ll Just Rent Forever!” (And Close More Deals)

As real estate agents, you’ve all heard it: the discouraged buyer who throws their hands up and declares, “I’ll just rent forever!” They get overwhelmed by the numbers, the interest rates, and the perceived mountain of debt. Sound familiar? Worse yet, they might talk to the wrong mortgage professional - someone who focuses only on the immediate numbers and scares them away from their dream of homeownership.

I recently spoke with a friend in his early 50s, eight years out from a divorce, who perfectly exemplifies this. He’s got a solid down payment saved, but the current market has him convinced homeownership is out of reach. He’s looking in the $900,000 range for a 4-bedroom home (to rent out a couple of rooms), but the initial payment calculations had him ready to throw in the towel. This is where I come in - and where I, as your trusted mortgage partner, can help you shine.

Beyond the Sticker Shock: The Power of Perspective

It’s easy for buyers to get fixated on the big monthly payment number. But as real estate professionals, you know there’s so much more to the story. It’s our job to paint the bigger picture, to show them the long-term benefits of homeownership that outweigh the initial financial hurdle. And it’s our job to ensure they work with a mortgage professional who understands the long game.

Let’s break down the numbers for my friend’s situation, and you’ll see how a little perspective can turn a discouraged renter into a confident homeowner.

The Numbers Tell a Story (But Not the Whole Story)

• Purchase Price: $900,000
• Down Payment: $180,000
• Loan Amount: $720,000
• Interest Rate (Current Example): 6.99% +/-

At 6.99%, his estimated principal and interest payment is around $4,785. Add in property taxes (1.25% of the purchase price, or about $937.50/month) and insurance ($350/month), and his total housing cost comes to roughly $6,072.50 per month. Scary, right? Not so fast.

The Magic of Renters (And Appreciation!)

He plans to rent out two rooms, bringing in $2,400 per month initially. That’s a significant offset! And remember, rental income can increase over time. Even a modest 3% annual increase makes a big difference over the long haul.

But the real magic happens with appreciation. Let’s assume a conservative 4% annual appreciation (and remember, real estate can appreciate even more!). In just five years, his $900,000 investment could be worth over $1,095,000! That’s almost $200,000 in equity growth! And it only gets better from there.

The Power of Principal Paydown (And Tax Benefits!)

While he’s busy living his life, his mortgage payments are also working for him, slowly but surely paying down the principal balance. This builds equity even faster. Plus, the interest portion of his mortgage payment is often tax-deductible, putting even more money back in his pocket.

The Impact of Interest Rate Changes

Interest rates are a big concern for many buyers. But what happens if rates go down? Let’s take a look:

• If rates drop to 5.99%: His estimated principal and interest payment would fall to around $4,312 per month. That’s a savings of almost $500 per month!
• If rates drop to 4.99%: His estimated principal and interest payment would fall to around $3,880 per month. That’s a savings of almost $1,000 per month!
• If rates drop to 3.99%: His estimated principal and interest payment would fall to around $3,485 per month. That’s a savings of over $1,300 per month!

The Long-Term Picture: 20 Years and Beyond

Let’s fast forward 20 years. Assuming 4% annual appreciation, that $900,000 house could be worth nearly $2 million! Starting with his $180,000 down payment, and adding the appreciation, and the principal paid down, his equity position would be almost $1.6 mil assuming he never refinmances to a lower rate.

The True Cost of Homeownership (With Rental Income)

Let’s consider the cost with the rental income factored in. In the first year, his annual housing costs are approximately $72,870. With $28,800 in rental income, his net cost is $44,070, or $3,672.50 per month. This cost will change over time as rents increase and his mortgage balance decreases. Even without the tax deduction he will have appreciatuion of $36,000 and a principal reduction of $7300 which means the cost of the home will really be about $770 the first year or about $64.00 per month.

Why This Matters to YOU (And Your Buyers)

As their real estate agent, you’re not just selling a house; you’re selling a future. You’re selling financial security, stability, and the opportunity to build wealth. And as your mortgage partner, I’m here to help you do it right.

I’ll work closely with your buyers, explaining these concepts in clear, easy-to-understand terms. I’ll show them how different interest rates impact their payments (and how even a 1% drop can save them hundreds of dollars a month!). I’ll help them understand the long-term benefits of homeownership and how it can be a powerful wealth-building tool. I won’t just quote a rate and tell them to refinance later - I’ll show them the whole picture.

Don’t let your buyers walk away thinking renting is their only option. Don’t let them fall into the trap of working with a mortgage professional who only sees the short-term. Partner with me, and let’s turn those “I’ll just rent forever” statements into “I’m ready to buy!” Contact me today for a personalized mortgage consultation for your clients.

Please let me know if you have any questions or if a client needs my guidance. I’m just a call, text, or email away.

Cell: 661-714-6258

TEXT: 661-714-6258

Office: 661-260-2970 ext. 2222

Direct Line: 661-291-2222

 Email: Mike@AugustaFinancial.com

2025 started, so lets make things happen. Please let me know if you would like to go over my latest marketing ideas!

But wait, there’s more…

Interest Rates

We had a good day or two last week, but thgis week has not started well for interest rates. CPI numbers come out tomorrow, so lets see what that does.

• We offer 12-day escrows for pre-approved buyers - Conventional/FHA/Jumbo/Bridge loans.
• We provide loans in all states, so call me with anything you need.
• Government Loans (FHA/VA/USDA) are in the 5’s and 6s.
• Conventional loans up to $806,500 are in the 6s.
• High Balance Loans from $806,501 to $1,209,750 are also in the 6’s and low 7’s.
• Jumbo loans above $1,209,750 are in the 6’s and low 7’s.
• Bank statement loans are available with 10% down again, with larger down payments in the 7’s.
• Profit and Loss Statement loans require 20% down - no bank statements needed, only a profit and loss statement!
• 0 down loans are available in the high 6s, with a minimum credit score of 620, up to $1,300,000.
• Private Money lenders offer Hard Money Loans with 35% down.
• No Ratio Loans require 30% down.
• DSCR (Debt Service Coverage Ratio) loans are available with as little as 15% down.
• Bridge Loans typically have an interest rate of 7.99% with limited fees, helping you get where you need to go!
• 3/2/1 Buydowns, 2/1 Buydowns, and 1/0 Buydowns are available at great starting rates!

Please note that interest rates are subject to change without notice, and the information above reflects LA County Loan Limits.

**Good News for Condos:** Diamond Head – YAY! Insurance is now correct!

**Bad News for Condos:** Nothing new!

The full state of California naughty list will be added to my website this week! Over 700 condos that are naughty per Fannie and Freddie.  

For all other issues involving condos, please check MikeMeena.com. I will post updates here, but all the information on the naughty list is available on my website. Just go there and click about to find our most updated list.

Let me know if you hear anything new about condos or townhouses.

I am available every day if you need anything.

Cell: 661-714-6258

TEXT: 661-714-6258

Office: 661-260-2970 ext. 2222

Direct Line: 661-291-2222

 Email: Mike@AugustaFinancial.com

Have a great day, and an even better tomorrow! Please call me when you have a client who needs to borrow!