Does It Cost More to Buy or Rent

This week’s blog post is about the cost related to value of buying vs. renting a home. I will compare the 2 options with some detail, to demonstrate why choosing to buy is a financially sound decision. In a previous blog, I talked about the advantages of getting pre-approved for mortgage loans. Now I will explore the financial advantages of home ownership.

 You may have wondered about the relative value and expense of both options and asked the question, “Is it better to rent or buy?”; It's very common for someone in the market for a new home to look only at the sale price . For instance, you may be looking in a specific neighborhood for a house, but come to the conclusion that it is out of your price range, based on the asking price. You see the sales price and get intimidated, without stopping to think about what the realized cost will be. By “cost” we typically mean out of pocket expense. For example, a home listing at $400,000 does not mean that is what you will spend on it. With our wide array of loan options, and historically low interest rates available, mortgage payments now are now very comparable to current monthly rents. .

 Owning your own home comes with tax benefits. Homeowners get the benefit of being able to write off the interest on their mortgage payments. In the fist few years of owning your own home this is very helpful, especially when borrowers with fixed-rate mortgages pay a decent amount of interest on their home loans. There is a very good chance that you will get a tax benefit from owning your own home, this should be considered when making the decision to rent or buy.

Rent

$2,000 per month

3 year total - $72,000

Equity - $0

Not Tax Deductible

Rent can increase year over year

Mortgage

Mortgage - $2,500 per month (PITI)

3 year total - $90,000

Equity - $22,006

Mortgage interest and mortgage insurance are tax deductible

Principle and Interest portion of mortgage is fixed and will not increase

This may seem like a time and energy consuming process, but when you compare the pro's to the con's you will likely see that buying is significantly better. It's time to take a leap and start building your equity rather than someone else’s. Contact me to complete the loan process and launchyour future as a home owner.

Locking In Your Rate

You never know when the lowest mortgage rate will be available to you, but with good timing, a little knowledge, and the help of your mortgage lender, you can lock in the interest rate once you have a ratified contract on a property.

 In a previous blog we discussed why the mortgage rates are so low, however they're constantly changing. This fluctuation makes it difficult to know when is the perfect time to lock in a rate. The last thing you want is to find your perfect house, only to learn the interest rates have gone up, or that you have to pay thousands more in points. In this blog I will be discussing how to lock in the lowest rate possible to save you the most money.

The process of locking in an interest rate varies from lender to lender.  Interest rates can vary on a daily basis.  While there are many variables that can impact interest rates, the most common reason for interest rate fluctuation is whether economic news is stronger or weaker than anticipated.  It will sound funny, but in order to have lower interest rates, you want to hear weaknesses in the economy with low inflation.  This combination will keep interest rates low to stimulate the economy.  Lenders typically have set times, Monday through Friday when the quotes are available and when you must lock in by in order to secure the agreed upon quote.

There are a few things to keep in mind regarding a mortgage rate lock-in to help ensure you are getting the best rate:

·          A rate quote is different than a rate lock - a quote has not legally binding and subject to change as the rates change; a rate lock secures that interest rate at the time of closing and is a binding agreement

·          Be organized and prepared; you may lock in once you have a ratified contract on a property and your settlement date is within a lender’s lock period.

·          It is best to have a specific property in mind and even better to be close to closing

·          Get the rate lock in a legally binding document, not just a verbal offer

·          Make sure the lock covers you to the settlement date

When locking in a mortgage rate, let your mortgage lender guide you through the process. Know your estimated closing date, and try to time your rate lock with that date. If you estimate 30 days to close, find out what the interest rate would be if you locked it for a 45-day period. You can't afford to take more time then you should.

You can save a lot of money by locking in the lowest rate possible to you, so it is worth the effort. The important thing is to get your rate on a day it's low and lock for enough time to close your loan. Interest rates are constantly changing, and currently they're the lowest they've been in years. Intercoastal Mortgage Company can help you obtain the best possible rate for you. Contact me and Iwill assist you in locking the interest rate for your loan.