HomeRenting v. Owning
Robin Cileno, BankAmerica Mortgage
Decades after the phrase "The American Dream" was first coined,owning a home is still among the lifetime achievement goals held by mostindividuals and families. The purchase of a home may also be viewed as avery important investment.
In most areas around the country, the value of a house tends to increase(or appreciate) over time. In contrast to rental payments, monthly mortgagepayments build into property ownership called equity, which the home ownercan convert into cash through refinancing or selling. Equally important,home owners are entitled to tax advantages that are not available to renters.In most instances, the interest paid on a home mortgage is tax deductible(consult your tax adviser), which can result in savings each year on a homeowner's federal tax returns. Unlike rent, which usually increases everyyear, the payments of fixed-rate mortgage programs stay the same for theentire term of the loan, allowing a home owner to make long-range financialplans.
Once potential home buyers considers how much they pay out in rent, thequestion becomes this: How can one afford not to buy a home? Only in a fewcases, such as for employees who expect to relocate in less than three orfour years, does renting make better financial sense than owning. Unlessa renter falls into one of these few categories, he or she should considerbuying a home.
Today's first-time home buyer loan programs enable renters to enjoy thebenefits of home ownership for not much more and in some casesless money than they are paying in rent. "Many lenders offeraffordable loan programs with low or no down payment requirements that featurereduced closing costs, relaxed qualifying guidelines, and, with adjustablerate mortgages (ARMs), below-market introductory rates," explains JohnGray, SVP of BankAmerica Mortgage. "Options such as government loans,zero points, or a pre-payment fee in exchange for a reduction in pointsmeans renters need less cash to close on a home of their own."
But before taking immediate advantage of the opportunity, do some researchfirst. Most prospective buyers find a home before they consider their financingoptions. Talk to your local lenders and find out how much home you can afford.A mortgage specialist will pre-qualify buyers so they can shop confidently,armed with the knowledge of how much they can afford to borrow. Everyonewants to experience that sense of privacy, stability and community thataccompanies a
permanent address; they wish to share special family moments and milestonesin their own kitchens and backyards. Homeownership frees renters to makepersonal lifestyle statements and to know the satisfaction that comes fromowning their own home.
Robin B. Cileno is a Regional Manager with BankAmerica Mortgage.