“To Rent or Buy? A Mortgage Expert’s Take on Your Big Decision”

Hey there! I hope you are having a great week! Every Day, I seem to get the classic question: “Should I rent or buy?” It’s a hot topic with high rates (around 6.75% ish) and sky-high prices. My knee-jerk answer? Buy whenever you can afford it! But let’s dig into the logic - because I’m all about practical financial moves. Whether you’re a first-time buyer, a move-up buyer, or someone eyeing investment properties, here’s how I break it down. Spoiler: it depends on your timeline and goals!

Example 1: The First-Time Buyer (5-15 Years Horizon)

You’re looking for your first home, hoping to stay put for 5-15 years. You may be eyeing a $550,000 home with a 5% down payment ($27,500) and a 30-year mortgage at 6.75%. That monthly payment might feel steep - around $4500, including taxes, Insurance, and HOA, but here’s the pitch:

• Long-Term Appreciation: Historically, homes appreciate about 6% annually. In 15 years, that $550,000 could be worth $1,349,000!
• Tax Benefits: You can write off mortgage interest and property taxes, easing the tax burden.
• Principal Paydown: Each month, you chip away at the loan, building equity - money you’d never see renting.
• Refinance Option: When rates drop (and they will - no “if” about it!), refinance to lower $4500 to, $3800, assuming rates get to 5%.
• Price Uncertainty: Who knows where prices will be in 5-15 years? Waiting might mean missing out on today’s growth.
• Best Line: “Buy now, lock in appreciation, and refinance when rates ease - renting just pays someone else’s mortgage!”
• Rent Costs: A $550,000 rental will run you about $3200 now, and that rent will be $3700 in 5 years and $4300 in 10 years, assuming 3% increases.

Example 2: The Move-Up Buyer (Selling at $650K, Buying at $900K)

You’ve got a condo worth $550,000 with a $300,000 loan at 2.75%-3.25% - a sweet deal from the low-rate days. You sell for $550,000, pocketing $200,000 in equity after paying off the loan, and now want a $900,000 home with 20% down ($180,000). That new payment? Around $5,900/month at 6.75%. But here’s the case:

• Equity Trade-Off: Your current write-off is small with low interest, and you’re under-leveraged (owing $300K on $550K). The new $900K home with an $720K loan boosts your write-off and leverages appreciation - potentially $1.6 million in 10 years at 6% growth! in 15 years, you have a property worth $2,200,000.
• Rate Relief: When rates drop to 5%, $5900 could fall to $5100, saving $800/month. Lower rates might raise prices, offsetting savings with higher property taxes.
• Long-Term Gain: Selling now and moving up builds wealth faster than sitting on a low-rate loan with minimal equity growth.
• Best Line: “Move up now, leverage the bigger write-off and appreciation - rates will drop, and you’ll save long-term. Waiting for risks higher prices, and taxes!”
• Math: Your monthly payment may be $2500 more than you had, but your property will be worth $800,000 more in 15 years, assuming a 6% appreciation. Your appreciation is $4444 per month, so you are winning by 1994 monthly vs. the 2.75% rate you have on your condo!

Example 3: The Investment-Minded First-Time Buyer (Multiple Properties Down the Road)

You’re excited to buy your first home, planning to move up later, and keep it as an investment. Say you buy a $550,000 house with 3% down ($16,500) and a 6.75% mortgage - about $4,700/month, including Taxes, Insurance, and HOA:

• Mortgage vs. Rent: That $1500 difference builds equity, not a landlord’s pocket. Plus, you get tax write-offs.
• Appreciation and Paydown: At 6% annual growth, that $550,000 could hit $1,000,000 in 10 years, with $75,000 in principal paid down - total equity of $545,000!
• Refinance and Move Up: When rates drop, refinance to lower the payment or pull cash for the next home. Keep this one as a rental, earning $1,200-$1500/month in 10 years.
• Long-Term Vision: Start small, let it appreciate, and build a portfolio - far better than renting long-term.
• Best Line: “Buy now with less down, enjoy appreciation and tax breaks, refinance when rates fall, and hold it as an investment for your future!”
• Math – $16,500 turns into $545,000 in 10 years. That’s a 35% Return on Investment! ANNUALLY!

I love this job and have been doing it for 35 years, and buying beats renting if you can swing it. High rates and prices are not optimal, but it's better than high rents and no appreciation! Waiting might mean missing the boat while rents keep climbing. Let me help crunch numbers with you and your clients, and let’s make some renters homeowners. Let’s make some first-time buyers move up, and let’s not let the interest rates and higher prices get in the way!

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

But wait, there’s more…

Interest Rates

Rates are at a 26-day low! YAY! There are signs that the economy is struggling! Fridays jobs report will go a long way to getting us over the hump! Let’s hope businesses close and people lose jobs so we can have lower rates! LOL!

Loan Programs

• We do loans on Non-warrantable condos!
• We offer 12-day escrows for pre-approved buyers - 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 high 5’s and low 6’s.
• Conventional loans up to $806,500 are in the mid 6s.
• High Balance Loans from $806,501 to $1,209,750 are also in the 6’s.
• Jumbo loans above $1,209,750 are in the 6’s and 7’s.
• Bank statement loans are available with 10% down again, 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 $1,300,000.
• 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:** – Nothing new!

**Bad News for Condos***

Nothing this week!  

The full state of California 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.

📞 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!