First Time Buyers
Rent or Buy a Home Analysis
There are many advantages to buying a home rather than renting, but there are also a few disadvantages. The primary advantages and disadvantages follow:
- Homes in California, historically, have appreciated on average over 3% per year, compounded annually. Given the historical average, for every $100,000 paid for a home today, the same home will be worth $133,037 in 10 years, $154,428 in 15 years, and $240,370 in 30 years. That $400,000 condominium will become worth about $1,000.000 in 30 years. With a fixed rate loan, your loan payment will remain the same for 30 years, at which point, you will own the home free of a mortgage. Of course, many people are able to pay off their loan in 15 to 20 years.
- Rents in California, historically, have increased on average over 3% per year, compounded annually. Given the historical average, for every $1,000 paid monthly for rent today, the rent will be $1,330 in 10 years, $1,544 in 15 years, and $2,404 in 30 years. At the end of 30 years, you own nothing but continue to pay rent that has increased two and one-half times.
- Interest paid on a real estate loan is almost always 100% tax deductible.
- Buying a home creates a forced savings plan as you pay the monthly principal on the loan.
- There is no landlord to tell you that you must move out because they are selling the property or a relative is moving in.
- You can customize your own home.
- Owning a home is the best way to build your credit score and your net worth.
- You can borrow against the equity you develop in the property if you want to do so.
- Home ownership makes retirement far more comfortable and makes it more realistic to achieve.
- Homeowners generally have strong social ties to their community.
- Homeowners live in communities that are more stable with more long-term residents.
- As a homeowner, you and your entire family will feel more secure.
- You will have far more freedom to have pets.
- You are likely to live in a safer neighborhood.
- You will have a significant asset to leave to your children.
Both FHA and VA loans make it possible for people who think they cannot buy a home to do so. Please read the articles on FHA and VA loans if you want to buy your first home.
The real estate agents with Pacific-Realtors.net can assist you in buying your first home. Let us help you become a homeowner.