Mike’s Morning Mortgage Update – Own vs. Rent

With tax season approaching, we are about 35 days away from the tax filing deadline before extensions. Now is actually one of the best times of the year for real estate agents to talk with clients about homeownership.

Many buyers are on the fence right now. Rates are hovering around 6%, affordability is tight, and the median age of a first-time homebuyer has climbed to about 42 years old. That tells us something important. Many people are waiting longer than ever to buy because they do not understand the long-term financial benefits of owning a home.

Education is one of the most powerful tools we have to help buyers make confident decisions.

Some of what I am about to say may sound familiar, but the numbers are worth repeating.

In 1967, the median-priced home in California was around $35,000 to $40,000. Today, about 51 years later, the median price is roughly $760,000. That represents an average appreciation of about 6.3% annually over that time period.

Now let's look at a realistic example using today’s numbers.

If a buyer purchases a $760,000 home and the property appreciates by just 4% in a year, that is $30,400 in equity gained from appreciation alone. Broken down monthly, that equals about $2,533 in wealth being created.

Next, let's look at the tax benefits.

Assume the buyer puts 5% down, and the monthly payment is about $5,616.

Here is what that looks like annually:

Mortgage interest: $43,000

Property taxes: $7,916

PMI: $2,550

Total potential tax deductions: $53,466

For someone in a 24% tax bracket, that equals about $12,813 in tax savings, or roughly $1,069 per month. Many buyers receive this benefit when they file their taxes, and some adjust their withholding so that money shows up in their monthly paycheck instead. You are correct, this allows your buyer to take advantage of the tax break from the moment they close escrow!  

Now let's add another important component that many people overlook.

Principal paydown.

Every payment reduces the loan balance and builds additional equity.

In this example, the principal reduction in the first year is about $8,866, which equals $738 per month in additional long-term savings.

Let's look at the bigger picture.

Monthly payment: $5,616

Monthly tax benefit: $1,069

Monthly principal paydown: $738

Monthly appreciation at 4%: $2,533

You are correct if you said the True cost of this home is $1276 monthly! 

When you factor in these components, the true financial impact of ownership differs significantly from the payment alone.

Now compare that to renting a similar home for about $4,200 per month, which is roughly what a $760,000 home would rent for in many markets. With rent, none of that payment builds wealth, none of it creates equity, and there are no tax advantages.

This is where education becomes critical.

Many buyers simply look at the monthly payment and stop there. When you walk them through the full financial picture, the conversation changes.

That is exactly where I come in.

I regularly break down these numbers for buyers based on their specific situation, tax bracket, loan program, and purchase price. When clients see the real financial comparison between renting and owning, it often gives them the clarity and confidence they need to move forward.

If you have clients who are on the fence or trying to understand whether buying makes sense right now, I am always happy to run these numbers and walk them through it.

Sometimes the difference between hesitation and a confident decision is simply understanding the math.

Please let me know if you have any questions or if you or any of your clients, friends, or family members need my guidance. I’m just a call, text, or email away.

📞 Direct Line: 661-291-2222 – Text OK

📞 Cell: 661-714-6258 – Text OK

📞 Office: 661-260-2970 ext. 2222 – Text OK

📧 Email: Mike@AugustaFinancial.com

But wait, there’s more…

Interest Rates

Best rates in 3 years to worst rates in 2 months! We had a little reprieve at the end of the day yesterday when the President said that the war in Iran was almost over. He may have exaggerated a bit, but I try not to listen to what any politicians say!  

 Loan Programs

• We do loans on Non-warrantable condos!  
• We offer 12-day escrows for pre-approved buyers, including conventional, FHA/Jumbo/Bridge loans.
• We provide loans in all 50 states, so call me with anything you need.
• Government loans (FHA/VA/USDA) are in the 5s.
• Conventional loans up to $832,750 are in the mid to high 5’s.
• High-balance loans from $832,751 to $1,249,125 are also in the high 5 and 6s.
• Jumbo loans above $1,249,125 are in the high 5’s and 6’s.
• ARMS in the 5’s and some in the 6’s
• Bank statement loans are available again with 10% down, with larger down payments in the 6’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 $1,325,000.
• Private Money lenders offer Hard Money Loans with 35% down.
• No-Ratio Loans require a 30% down payment.
• 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:**   

Nada today!  

**Bad News for Condos***     

Moorpark Terrace: 13543 Magnolia Blvd – Deferred maintenance / Critical repairs

Las Ventanas: Balcony Issues!  

Diamond Head: We have some concerns over there. Per Fannie Mae, certain parts of the complex are approved, while other parts have outstanding critical repairs.  

Buenaventura Gardens: Restriction 22 – Portions of the project have outstanding critical repairs. Lender to review the CPM comments for more details.  

CONDO HELP!!!

If you have a listing or a buyer interested in a specific condo and are unsure whether it is warrantable or Non-warrantable, please call me, and we can look up Fannie’s list in real-time. We don’t know when something has changed, and it would be impossible to track everything day by day, but we don’t mind looking up a few items each day.  

The full state of California’s naughty list has been added to:

MikeMeena.com! See the link below:

https://mikemeena.com/non-warrantable-condos/

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

I am available every day if you need anything.    

📞 Direct Line: 661-291-2222 – Text OK

📞 Cell: 661-714-6258 – Text OK

📞 Office: 661-260-2970 ext. 2222 – Text OK

📧 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!

Sincerely,