Renting vs Owning – The Big Debate

Renting vs Owning – The Big Debate

There comes a time in everyone’s life where they have to make the ultimate decision and decide whether to buy and own their own home or continue to rent. It’s a huge decision as both have notable benefits and disadvantages and it is not one to be taken lightly. So lets have a look at these advantages and disadvantages to see which option is really the best option for you.

Owning your own home is the traditional dream that practically everyone has, especially when it comes to starting a family. It gives you a feeling that you have accomplished one of your goals and that you are both financially and emotionally secure as well as giving you a great sense of community. But is it the right decision for you? Lets have a quick look at the advantages and disadvantages of buying and owning your own home.

Advantages:

  • Set your own rules
  • Sense of security
  • A home is a great investment (long term, not for a quick turnaround, especially in todays market)
  • Get various sort of tax rebates and deductions
  • Repayment is usually the same or even lower than it would cost to rent – see example of my rent vs own comparison
  • You build equiry over time
  • Improve your credit score if you need a loan in the future

Disadvantages:

  • You are liable for any accidents and injuries on your property
  • You are liable for any damage to your neighbors house if stemmed from your property – for example a tree branch falling over the fence and damaging something in your neighbors yard.
  • Responsible for any maintenance in, on, or around your home
  • No longer can you just pack up your things and leave when you want. You’ll need to list and sell your home
  • Large loan responsibility even if you are having financial hardship
  • Required to have homeowners insurance to cover damages to the property
  • Responsible for property taxes
  • Requires an upfront down payment (VA and USDA are 100% financing products, if you qualify)

Renting is something most of us start out doing and many people are comfortable doing it all their lives. There are many advantages to renting a home but there are also a few disadvantages. Let’s have a look at them.

Advantages:

  • You can up and leave as soon as your lease it up
  • If you run into a financial hardship, you can move again
  • Little or no responsibility for maintenance
  • Sometimes utilities are included in the rent cost
  • Sometimes you have free use of amenities such as laundry, pool, and other sorts of actualities

Disadvantages:

  • Limited or no freedom to what you can do with the place (paint, design, build, etc)
  • Rent MAY increase
  • No tax deductions
  • At risk of being evicted
  • The house could be sold and you can be asked to leave
  • Could have restrictions on certain things like noise and pets
  • Could have restrictions on the number of members living in the house/apartment
  • Rent is not going into a productive investment for you

As you can see clearly there are many advantages and disadvantages to owning your own home and renting. Some have advantages and disadvantages the other doesn’t have, but both can be a comfortable way to live. When it really comes down to it you have to choose the one that suits you’re financial, emotional and lifestyle needs at this time. You have to take your future into account as well, will you want to be tied down and take responsibility for a huge investment or will you prefer the freeness of being able to move whenever you please?  It can be quite a hard decision to make and it is one that needs a lot of time and thought before you proceed to take any further steps.

When you call me, I take the time to evaluate your current financial status and together we can compare the pros and cons to owning a home. In addition, I take the time to complete a Total Cost Analysis. Together, we will find the program that works best for you and your family.

Advertisements

Do I really need an Inspection for my Frisco Texas Home?

I am not surprised when a Home Buyer asks me ‘Do I really need an inspection?‘. After all, this may be their first home so they don’t know what expenses can be avoided and what is a must.

My answer to the question is always – ABSOLUTELY! The buyer should always get an inspection done on a home before moving forward with the purchase. And no, the appraiser (even on FHA loans) does not inspect the home as in-depth as a Home Inspector.

Imagine moving into your home in the middle of winter, only to find out that the furnace doesn’t work. Replacing a 40 year old furnace is far more costly than hiring a home inspector. Buying a home is likely the largest investment you’ll ever make. The buyer needs to be assured they are investing in a quality home.

A Home Inspector will examine the following (and much more):

  • Heating System
  • Central Air Conditioning System
  • Interior Plumbing
  • Electrical System
  • Roof and Attic
  • Insulation
  • Walls, Ceilings, and Floors
  • Windows and Doors
  • Foundation
  • Basement (not very popular in Frisco Texas)
  • Overall Structure of the Home
The BEST part of having a home inspection before you purchase a home is this fact; if there are significant problems, you have the ability to walk away from the deal. However, if you purchase a home without a thorough inspection, you may find yourself paying more money then you should.
 
If you need help finding a Home Inspector in Frisco Texas or the surrounding areas, feel free to give me a call.

Texas Interest Only Loans

Interest-only loans in Texas are still around. Even though they are not as popular as they once were, they do still exist.
 
Over the past few years, they have been the topic of conversation. Many homeowners were placed into these programs without being told exactly what type of program that it is or without completely understanding them when they agreed to them. There are certainly benefits of Interest Only Loans when purchasing a home or refinancing, but there are also risks associated with them. 
 
* Please note that this product is available to anyone that qualifies but personally, I only recommend this program for someone that has a fixed monthly income with a potential of receiving a monthly or quarterly bonus. Or, someone that is paid on commission only.
 
Here are just a few of the benefits of interest-only loans:
 
– Smaller interest-only payments give borrowers with uneven income a greater degree of flexibility. The savings generated from interest-only loans versus traditional mortgages give borrowers greater control over their finances, freeing up more money for use in investments or catching up on other bills.
– Smaller monthly payments during the initial interest-only term allows borrowers to afford more home for the same amount of money, or less. Depending on your income, this could mean an increase to your purchasing power by $5,000-$30,000.
– Interest-only payments made during the initial loan term are entirely tax deductible.
 

The risks of interest-only loans:
 
– If home prices fall, borrowers could end up owing more money on a home than it’s actually worth. Unless the borrower makes payments against the principal, the home builds no equity aside from annual appreciation.
– After the initial interest-only period, the principal balance can cause monthly payments to skyrocket, especially if interest rates have increased.
– The minimum monthly payment option (available on some interest-only loans) doesn’t cover the total interest accrued for a given month.  The difference is tacked onto the balance, increasing the principal balance, which results in negative amortization. A negative amortization can erode existing equity already built in a home.
Understanding some of the benefits and risks associated with interest-only loans is imperative when searching for a mortgage that fits your needs.  If you’re looking into refinancing your mortgage or considering buying a home, you need a professional who will take the time to identify your financial goals, and who has the experience and the resources to help you achieve them.
 
Do not move forward with a Loan Originator that is trying to fit you into a specific loan program without telling you the pros and cons of that program. Ask questions to understand your mortgage options and why one program may be better than nother. There are many programs and options available, but not all of them will help you achieve your financial goals.

Texas Home Affordable Refinance Program HARP

Extension of the Texas Home Affordable Refinance Program HARP

Back on March 11, 2011, the Federal Housing Finance Agency announced two exciting changes to the Texas Home Affordable Refinance Program (HARP). This program is for Texas borrowers who have demonstrated an acceptable payment history on their Texas mortgage, but due to a decline in Texas home prices or where mortgage insurance is not available, have been unable to refinance to obtain a lower payment or move to a more stable Texas mortgage product. Here is a quick re-cap of the changes:

 

The program has been extended by one year. Texas lenders can continue to originate HARP loans provided the note date is on or before June 30, 2012.

The program has been expanded, and more Texas loans will now qualify for the program. Previously to be eligible for a HARP loan, the existing Texas loan had to be purchased by Fannie Mae or Freddie Mac prior to March 1, 2009. This date range has now been expanded to include Texas loans purchased by the agencies prior to June 1, 2009.

This means that people who may not have been able to take advantage of a HARP Texas refinance in the past may now be able to do so.

Texas Relocation – Part 3 Temporary Housing

Texas Relocation – Part 3

If you have followed the other two parts, then you are mentally prepared to move and have found a home in your new area. In Part 3 of 9, we will discuss Temporary Housing. A temporary home is used when there is a gap between the date you move our of your old home/rental and when you move into your new home.

Having a gap in your move can be caused by a few things. For example, if you purchased a brand new home that is being built. The home may not be ready for another month or two, but your company needs you at the new location now. During this two month period you may find a home or apartment that is available now and will allow you to keep a short lease.

How do you find a temporary home?

Finding the right rental is very similar to finding the right home. If you are relocating for your company, check your employer’s policy on rentals. In some cases, the company will pay the deposit and may pay for the termination of the lease (should there be one)

You may also consider talking with the Real Estate Agent or Relocation Specialist you worked with when finding your home. Since they are familiar with the area, they could probably find a temporary home that is in a great location, is the right size for your family, and can accommodate your short term living arrangement. In bigger cities, apartment locating services are available. Two other solutions can be the local Newspaper Classifieds which can be hit-or-miss if you don’t know the territory, or a co-worker in the new area may be able to direct you.

Just like when you were looking for your home, be specific with your needs. Even though it will be temporary, you still do not want it to 100% inconvenient. How many rooms do you need? Do you need public transportation? How much rent do you want to pay? What services / amenities are important to you? The more specific you are, the easier it will be to find a home that will fit your temporary needs.

Naturally, you want as much comfort and convenience as you can find. You may not have all of the conveniences of a permanent home, but you can come close. Look for something with pleasant surroundings and sufficient space. You don’t want your family to feel inconvenienced, cramped, or depressed with the decor – even if this is temporary.

Many ‘Short Term’ rental properties come equipped with china, linen, and some may even have maid service. You’d be surprised with how far ‘temporary housing facilities’ have come due to their popularity. This is especially common in newly developed areas. Look for assistance from the Relocation Specialist or Real Estate Agent. More than likely, they are familiar with these developments and point you in the right direction.

Additional Principal Reductions… why its worth it.

You heard the radio adds, the television commercials, and your neightbor talk about the mortgage rates being at an all time low. Then you called your local mortgage company only to find out the rate was not much better than your current rate. Now what? Don’t worry, you still have options and it wont take a refinance to do it.

Did you know that most mortgage companies will allow you to make additional principal payments on your loan balance? Perhaps you receive a larger than expected tax return, an inheritance, a non-taxable cash gift, or that work bonus you were not expecting. You could apply this money toward your loan principal which result in a signicant savings and shorter loan life.

For this example, I am using a loan balance of $150,000, a rate of 5.0%, and a 30 year fixed rate mortgage. Please note that these examples are useful on Conventional, FHA, and VA loan programs. The only time this will not apply is if you currently have an Adjustable Rate Mortgage.

Based on the above numbers, your mortgage payment (principal and interest only) would be $805.23 per month. If you made each payment on time, with no additional principal, then at the end of 30 years, you will have paid $289,885.27 in payments ($139,882.27 in interest).

Does your budget allow for you to make one additional mortgage payment per year ($805.23 per year) which would be applied directly toward your principal? If so, you would pay off your mortgage in 305 payments (25 1/2 years). This is a savings of $$24,524.59 in interest. Think you can save $805.23 a year? No? How about if you broke up the $805.23 in 12 easy installments?

Look over your budget and see if you could afford $67.11 per month to add to your mortgage payment. By making this additional principal payment each month, you have increased your overall savings to $25,453.13. Your mortgage would be paid off in as little as 303 payments (25 years, 3 months).

All of this without spending ONE DIME on refinance fees. If you already have a great rate, but would like to pay off your mortgage sooner, this is the best way without refinancing to a shorter term. For best results, apply principal reductions more often rather than making one time payments each year. If making a principal reduction once a year, or once every 5 years is your only options, still do it. The reduction should still save you thousands of dollars in the long run.

**************************************

If you live in the state of Texas and are looking for a reliable Mortgage Professional to assist you with the loan product that best fits your financial situation, give me a call. We do not charge upfront fees to run scenarios or charge unnecessary application fees.

Do you want to know all of your options? Call me today and let’s discuss them further.

Always available for your Frisco Texas Mortgage needs!

John Cannata  Legacy Texas Mortgage p# 214.728.0449

www.JohnCannata.com

Frisco Texas Mortgage Consultant

Credit – Your Greatest Asset

Credit… Your Greatest Asset

In my first post, I discussed what to look for on your credit report, such as checking for accurate data.  Starting with the basic information like you name, employment, and address.  Then moving on to your payment history to ensure the creditors are publishing the payments and there aren’t any lines of credit open that you are unaware of.

 In my second post, I discussed how to Build or Rebuild Your Credit.  These techniques are basic and can help you whether you filed for Bankruptcy in the past or maybe have never had credit at all.

So… Why is Credit Your Greatest Asset?   

The simple truth is that good credit saves money.  In some people’s minds the system works backwards.  Those that can least afford it pay the highest interest rates and other fees for using someone else’s money.  People that save, spend wisely, and use credit sensibly  are rewarded with lower rates and greater opportunities to borrow money and use credit cards.

As I mentioned in the previous posts, when it comes to buying your home, the difference you pay for your loan may amount to thousands of dollars.  Even starter homes in most markets cost over a hundred thousand dollars, and in many areas they’re far more than that.  Just one percentage point in interest multiplied over the life of the mortgage mounts up quickly.  Additionally, if you are considered a high risk, you are sure to pay more in other fees and be required to take out mortgage insurance.

Too many people concentrate on how much they pay each month for their house, car, or other major purchases.  What they should look at instead is how much the loan is costing them over its lifetime.  Wouldn’t you rather pay $25,000 for a mortgage than $75,000?  Make it your new habit, if you don’t already do it, to calculate how much each credit card or installment loan is really costing you.  Once you start, you’ll be excited to learn how much you can save by using smart financial practices. 

Make it your goal to ensure that your credit truly is Your Greatest Asset.  There isn’t a better win-win situation in which to find yourself.