5 Powerful Reasons Owning a Home is Better Than Renting

5 Powerful Reasons to Own Instead of Rent | MyKCM

Owning a home has great financial benefits.

In a recent research paper, Homeownership and the American Dream, Laurie S. Goodman and Christopher Mayer of the Urban Land Institute explained:

“Homeownership appears to help borrowers accumulate housing and non-housing wealth in a variety of ways, with tax advantages, greater financial flexibility due to secured borrowing, built-in ‘default’ savings with mortgage amortization and nominally fixed payments, and the potential to lower home maintenance costs through sweat equity.”

Let’s breakdown 5 major financial benefits of homeownership:

1. Housing is typically the one leveraged investment available

Homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. A 20% down payment results in a leverage factor of five, meaning every percentage point rise in the value of your home is a 5% return on your equity. If you put down 10%, your leverage factor is 10.

Example: Let’s assume you purchased a $300,000 home and put down $60,000 (20%). If the house appreciates by $30,000, that is only a 10% increase in value but a 50% increase in equity.

2. You’re paying for housing whether you own or rent

Some argue that renting eliminates the cost of property taxes and home repairs. Every potential renter must realize that all the expenses the landlord incurs (property taxes, repairs, insurance, etc.) are baked into the rent payment already – along with a profit margin!!

3. Owning is usually a form of “forced savings”

Studies have shown that homeowners have a net worth that is 44X greater than that of a renter. As a matter of fact, it was recently estimated that a family buying an average priced home this past January could build more than $42,000 in family wealth over the next five years.

4. Owning is a hedge against inflation

House values and rents tend to go up at or higher than the rate of inflation. When you own, your home’s value will protect you from that inflation.

5. There are still substantial tax benefits to owning

We know that the new tax reform bill puts limits on some deductions on certain homes. However, in the research paper referenced above, the authors explain:

“…the mortgage interest deduction is not the main source of these gains; even if it were removed, homeowners would continue to benefit from a lack of taxation of imputed rent and capital gains.”

Bottom Line

From a financial standpoint, owning a home has always been and will always be better than renting.


Posted on July 13, 2019 at 10:18 am
Kara Brem | Posted in Real estate | Tagged , , , , , ,

Are You Better Off Paying Your Mortgage Earlier or Investing Your Money?

 

Photo Credit: Rawpixel via Unsplash

Few topics cause more division among economists than the age-old debate of whether you’re better off paying off your mortgage earlier, or investing that money instead. And there’s a good reason why that debate continues; both sides make compelling arguments.

For many people, their mortgage is the largest expense they will ever incur in their lives. So if given the chance, it only makes logical sense you would want to pay it off as quickly as possible. On the other hand, a mortgage is also the cheapest money you will ever borrow, and it’s generally considered good debt. Any extra money you obtain could be definitely be put to good use elsewhere.

The reality is, however, a little less cut and clear. For some homeowners, paying off their mortgage earlier is the right answer. While for others, it would be far more advantageous to invest their money.

 

Advantages of paying off your mortgage earlier

  • You’ll pay less interest: Each time you make a mortgage payment, a portion is dedicated towards interest, and another towards principal (we’ll ignore other costs for now). Interest is calculated monthly by taking your remaining balance, the length of your amortization period, and the interest rate agreed upon with your lending institution.

If you have a $300,000 mortgage, at a 4% fixed rate over 30 years, your monthly payment would be around $1,432.25. By the time you finish paying off your mortgage, you would have paid a total of $515,609, of which $215,609 were interest.

If you wanted to lower the total amount you pay on interest, you don’t need to make a large lump sum to make a difference. If you were to increase your monthly mortgage payment to $1,632.25 (a $200 a month increase), you would be saving $50,298 in interest, and you’ll pay off your mortgage 6 years and 3 months earlier.

Though this is an oversimplified example, it shows how even a small increase in monthly payments makes a big difference in the long run.

  • Every additional dollar towards your principal has a guaranteed return on investment: Every additional payment you make towards your mortgage has a direct effect in lowering the amount you pay in interest. In fact, each additional payment is, in fact, an investment. And unlike stocks, bonds, and other investment vehicles, you are guaranteed to have a return on your investment.
  • Enforced discipline: It takes real commitment to invest your money wisely each month instead of spending it elsewhere.

 

Your monthly mortgage payments are a form of enforced discipline since you know you can’t afford to miss them. It’s far easier to set a higher monthly payment towards your mortgage and stick to it than making regular investments on your own.

Besides, once your home is completely paid off, you can dedicate a larger portion of your income towards investments, your children or grandchildren’s education, or simply cut down on your working hours.

 

Advantages of investing your money

  • A greater return on your investment: The biggest reason why you should invest your money instead comes down to a simple, green truth: there’s more money to be made in investments.

Suppose that instead of dedicating an additional $200 towards your monthly mortgage payment, you decide to invest it in a conservative index fund which tracks S&P 500’s index. You start your investment today with $200 and add an additional $200 each month for the next 30 years. By the end of the term, if the index fund had a modest yield of 5% per year, you will have earned $91,739 in interest, and the total value of your investment would be $163,939.

If you think that 5% per year is a little too optimistic, all we have to do is see the S&P 500 performance between December 2002 and December 2012, which averaged an annual yield of 7.10%.

  • A greater level of diversification: Real estate has historically been one of the safest vehicles of investment available, but it’s still subject to market forces and changes in government policies. The forces that affect the stock and bonds markets are not always the same that affect real estate, because the former are subject to their issuer’s economic performance, while property values could change due to local events.

By putting your extra money towards investments, you are diversifying your investment portfolio and spreading out your risk. If you are relying exclusively on the value of your home, you are in essence putting all your eggs in one basket.

  • Greater liquidity: Homes are a great investment, but it takes time to sell a home even in the best of circumstances. So if you need emergency funds now, it’s a lot easier to sell stocks and bonds than a home.

Posted July 1 2019, 11:00 AM PDT by Kenady Swan


Posted on July 2, 2019 at 8:28 am
Kara Brem | Posted in Uncategorized |

Top 4 Renovations for the Greatest Return on Investment

Top 4 Renovations for the Greatest Return on Investment! [INFOGRAPHIC] | MyKCM

Some Highlights:

  • If you are planning on listing your house for sale this year, these four home improvement projects will net you the most Return on Investment (ROI).
  • Minor renovations can go a long way toward improving the quality of your everyday life and/or impressing potential buyers.
  • Whether you plan to stay in your house for a long time or just a few years, it’s smart to know which home renovations add the most value.

Posted on June 16, 2019 at 9:42 am
Kara Brem | Posted in Uncategorized |

Minimize and simplify your living space

Have you considered what it would feel like to let go of the “stuff” in your life and downsize?  To remove all the excess items you’ve acquired over the years and really minimize?

I recently did just that and I will tell you…it feels better than I ever imagined.  Everything I own now fits in my recently purchased 800 sq ft one bedroom La Costa condo and 1 car garage…including my car!

Living a minimalist lifestyle is not for everyone.  It’s certainly a case-by-case scenario and if you still have little ones in the house there are other versions of minimalism or simplifying that can also be rewarding, without limiting your living space to an extreme degree.

In my situation, my independent daughter is 25 and has been out of the house for years.  She’s not coming home to live with mom anytime soon.   When she does come for a visit, I splurge and get her an airbnb right down the street.  She has her space and I have mine.  It’s perfect!


 

 

When I bought my little condo, people thought I was a tad off my rocker.  Some thought I must be experiencing financial difficulties.  WHY would I ever want to do such a thing and why live in a small space?

 

 

Well here you have it.  These are  the benefits I’ve experienced thus far in my minimizing adventure:

  • I know exactly where EVERYTHING I own is.  No more searching through boxes or cabinets looking for that one item.
  •  I’m organized beyond belief.  You have to be in a small space!
  • Instead of buying a home that was MORE than I needed, I now have money to travel, explore, and enjoy life when I have the time off work.  I’m not a slave to my mortgage.
  • My manageable mortgage payment allows me to start on my next life goal…purchasing investment properties to create future financial comfort and stability for my “later years”.
  • I don’t waste my money on anything I don’t need because it just doesn’t fit!  If I want to purchase something, something else has to go first.

Letting go and giving away my excess “stuff” allowed me to share things I did not need with those that did.  Smiles for days.  This activity was enough to make me want to give away more and so I did!  People are so appreciative and many needed these things much more than I did.

So, if this sounds like a way of life you’d like to explore and if you’re ready to downsize, let’s get started looking for your new home. It’s a great time to start a new, simple lifestyle and it starts with your home base.  I’m happy to help and I’m so excited about this new way of life I just want everyone to experience it.

 


Posted on June 6, 2019 at 12:05 pm
Kara Brem | Posted in Uncategorized |

Renting vs. buying. What’s best for you?

The debate about whether it makes more financial sense to rent or buy has been raging for decades. Advocates of buying argue that when you pay rent you’re paying for someone else’s mortgage. When you buy, you are making an investment, which can significantly increase in value every year you live in the home.

Supporters of renting say that the extra costs associated with owning a home, such as interest payments, taxes, maintenance, can add up. They add that there’s no guarantee that those expenses will be recouped when the house is sold. Instead of investing in a home, you may be better off investing your savings in stocks, bonds, and other financial securities that hold less risk.

Matthew Gardner, our Chief Economist, forecasts, that we will not break 5% for 30-year fixed Mortgage rates for 2019, and likely won’t break it next year.

This means that getting a mortgage is relatively cheap, raising the question, ‘Is it really worth it to keep renting?’

Even if interest rates stay low, whether to rent or buy has a lot to do with each person’s specific situation. Here are a few considerations to make as you decide.

 

What’s the real estate situation in your city?

Industry groups put out reports every quarter stating the average national sales price for a home, and the average monthly payment for a U.S. rental. These reports are typically based on an average of all the cities in the U.S. But what really matters is what the numbers show when you dig into them on a local level.

Investigate the local sales and rental markets, and you’ll see there are some cities that fall well below that average, and some that rise far above it. When comparing housing costs, be sure to base your evaluation on what’s happening in your city and neighborhood, not the nationwide averages.

 

How long do you expect to live there?

If you don’t plan to be living in the same place for at least five years, renting is probably your best bet financially. But if you think you’re ready to settle down for as long as 7 to 10 years, chances are very good that any home you purchase will appreciate during that time even if the economy runs into some bumps along the way.

 

What’s the mortgage rate?

One of the other key factors to consider is the cost of your loan (the interest you’ll pay the lender). Fortunately, our Chief Economist, Matthew Gardner, does not expect interest rates to hit or break 5 percent, meaning money is relatively cheap.

Your mortgage rate will depend on how much money you have saved, your credit score, and other factors, so make sure to talk to a loan officer before you start looking for a home. Being pre-approved for a mortgage narrows down your price range and helps strengthen your offer when it comes time to compete for your new home.

 

Can you pay a bit more?

It can be advantageous to work a lower monthly payment to the bank so that you can pay a little more than the payment.

For example, if you can afford to pay a little extra towards your mortgage bill each month, say $300 more per month, on a 30-year, $300,000 loan, can knock eight years off the life of the loan and reduce your final bill by more than $63,000. That’s savings you would never see if you rented.

 

Will you need to make repairs or improvements?

Buying a fixer-upper may seem like a great way to get a deal on a house, but if the money you spend on the repairs is too great, your profit could be diminished when it comes time to sell. The same is true for remodeling and improvement projects.

Additionally, you can work with your Mortgage lender for a repair loan. This can help you get that lot you want, and help you pay for the repairs.

But ultimately, if you can only afford a home that demands major improvements, and you don’t have the skills to do much of the work yourself, it’s probably better to rent.

 

Do you have other ways to invest?

Many see a home purchase as an easy way to invest—a place where they can generate savings through home equity. But others say you can make more money renting an apartment and investing your savings in stocks, bonds, and other financial securities.

This is where a financial advisor might come in. They’ll be able to break down what you need to do in order to get the best return on your investments. They’ll also be able to see the big picture when it comes to your money.

 

Can you rent part of the house?

Speaking of a diverse portfolio, let your investment work for you. If you buy a house that includes a rental (extra bedroom, mother-in-law unit, etc.), you could be the landlord instead of paying the landlord. With that rental income, you could pay off the mortgage faster and contribute more to your savings. But, of course, you need to be willing to share your home with a tenant and take on the responsibilities of being a landlord or working with a professional property manager to help you with those duties.

 

Making your decision

To make your decision about whether to rent or buy easier, input the key financial facts regarding your situation into this Realtor.com Rent vs. Buy Calculator:  For help making sense of the results and analyzing other factors, contact me to discuss your options.


Posted on May 21, 2019 at 10:58 am
Kara Brem | Posted in Uncategorized |

What’s Holding You Back From Buying?


Posted on May 13, 2019 at 8:57 am
Kara Brem | Posted in Uncategorized |

Slaying the Largest Homebuying Myths Today

Slaying the Largest Homebuying Myths Today [INFOGRAPHIC] | MyKCM

Some Highlights:

  • The average down payment for first-time homebuyers is only 6%!
  • Mortgage interest rates have been on the decline since November! Hop in now to lock in a low rate!
  • 88% of property managers raised their rents in the last 12 months!
  • The average credit score on approved loans continues to fall across many loan types!

Posted on April 30, 2019 at 10:54 am
Kara Brem | Posted in Uncategorized |

Are Low Interest Rates Here to Stay?

Are Low Interest Rates Here to Stay? | Simplifying The Market

Interest rates for a 30-year fixed rate mortgage have been on the decline since November, now reaching lows last seen in January 2018. According to Freddie Mac’s latest Primary Mortgage Market Survey, rates came in at 4.12% last week!

This is great news for anyone who is planning on buying a home this spring! Freddie Mac had this to say,

“Mortgage interest rates have been steadily declining since the start of 2019. These lower mortgage interest rates combined with a strong labor market should attract prospective homebuyers this spring and could help the housing sector regain its momentum later in the year.”

To put the low rates in perspective, the average for 2018 was 4.6%! The chart below shows the recent drop, and also shows where the experts at Freddie Mac believe rates will be by the end of 2019.

Are Low Interest Rates Here to Stay? | Simplifying The Market

Bottom Line

If you plan on buying a home this year, let’s get together to start your home search to ensure you can lock in these historically low rates today!


Posted on April 23, 2019 at 9:16 am
Kara Brem | Posted in Real estate | Tagged , , , , ,

3 Graphs that Show What You Need to Know About Today’s Real Estate Market

3 Graphs that Show What You Need to Know About Today's Real Estate Market | MyKCM

The Housing Market has been a hot-topic in the news lately. Depending on which media outlet you watch, it can start to be a bit confusing to understand what’s really going on with interest rates and home prices!

The best way to show what’s really going on in today’s real estate market is to go straight to the data! We put together the following three graphs along with a quote from Chief Economists that have their finger on the pulse of what each graph illustrates.

Interest Rates:

“The real estate market is thawing in response to the sustained decline in mortgage rates and rebound in consumer confidence – two of the most important drivers of home sales. Rising sales demand coupled with more inventory than previous spring seasons suggests that the housing market is in the early stages of regaining momentum.” – Sam Khater, Chief Economist at Freddie Mac

3 Graphs that Show What You Need to Know About Today's Real Estate Market | Keeping Current Matters

Income:

“A powerful combination of lower mortgage rates, more inventory, rising income and higher consumer confidence is driving the sales rebound.” – Lawrence Yun, Chief Economist at NAR

3 Graphs that Show What You Need to Know About Today's Real Estate Market | Keeping Current Matters

Home Prices:

“Price growth has been too strong for several years, fueled in part by abnormally low interest rates. A mild deceleration in home sales and Home Price Index growth is actually healthy, because it will calm excessive price growth — which has pushed many markets, particularly in the West, into overvalued territory.” – Ralph DeFranco, Global Chief Economist at Arch Capital Services Inc.

3 Graphs that Show What You Need to Know About Today's Real Estate Market | Keeping Current Matters

Bottom Line

These three graphs indicate good news for the spring housing market! Interest rates are low, income is rising, and home prices have experienced mild deceleration over the last 9 months. If you are considering buying a home or selling your house, let’s get together to chat about our market!


Posted on April 9, 2019 at 10:20 am
Kara Brem | Posted in Uncategorized |

Dollar-Stretching Ideas for Couples Taking the Next Step

 

 

 

 

 

 

 

 

 

 

 

Image courtesy of Pixabay

Article courtesy of:

Natalie Jones

natalie_jones@homeownerbliss.info

 www.homeownerbliss.info

Are you and your partner ready to cohabitate?  Making that decision is often exciting and nerve-wracking at the same time.  Thankfully, keeping a few dollar-stretching strategies in mind means outfitting your new place can add to the fun without adding to your stress.

 

Out with the old

Every household has basics, so most couples discover they have several duplicate items when they move in together.  Take some time to sort through what you both have, decide what you need to acquire, and think about what items are due for an upgrade.  Pay special attention to tablecloths, gadgetry, cookware, and the like.  NBC News points out kitchen items in particular need routine replacement, with non-stick cookware warranting extra consideration, since worn or peeling cookware should be thrown out and replaced.  Make some notes to ensure you have all your basics covered, and develop a shopping list for the items you need or want to purchase together.  You can buy everything from new linens to small appliances from retailers like Kohl’s, and on top of a great selection, Kohl’s promo codes help you make the most of your budget.

 

Color your world

With your essentials in order, addressing aesthetics is a logical next step.  Many couples add a fresh coat of paint to their new digs to give it their personal touch, so sit down together and discuss what shades in which rooms sound appealing.  Elle Decor points out many of the hottest color trends incorporate hues from the great outdoors, such as shades borrowed from woodlands in earthy browns, rich greens, and deep blues.  If you never painted before or haven’t done so as a joint project, brush up on basic how-to instructions, gather your supplies, and do your shopping someplace like Ace Hardware, where you can find everything you need for your project as well as take advantage of great deals.

 

Bedroom basics

Refreshing your bedroom can help you get started on the right foot.  Beyond the walls, consider revamping the color scheme in hues you both like, whether it’s soothing tones of teal and tan, cheerful coral and fuschia, or bold black and red.  Think accents, sheets, and even furniture colors.  And while you’re at it, consider investing in a new mattress and foundation.  It’s the perfect symbol of your decision to share space.  Some experts recommend replacing mattresses every seven to 10 years anyway, so if yours falls into that age range, all the more reason to start anew.  Then select appropriate linens to fit your new bed and colors.  You can shop online for the whole shebang from stores like Overstock, offering everything you need to dress your bedroom in style, just check out their current sales to ensure you snag great prices.

 

Sharing storage

Divvying up your closet space can seem simple at first, but many couples quickly discover making room for two sets of clothes can be a challenge.  There are plenty of ways you can improve the storage you have by adding drawers and shelving, or you can install a closet system.  If you or your partner is pretty handy, Family Handyman points out you can install a DIY closet system in a weekend, which can be a fun project to take on together.  Home Depot offers a wide variety of closet organization solutions, which you can DIY or have installed for you.  Take some measurements, make some sketches, and check Home Depot’s current offers to see what will work well in your space as well as your budget.

 

Combining your lives can be challenging, so make sure putting your home together isn’t a major financial stressor.  Look for smart and economical ways to outfit your home, make decisions together, and add some new things to signify your change.  When you’re taking that next step, it’s a great way to keep things light, positive, and fun.


Posted on March 3, 2019 at 8:40 am
Kara Brem | Posted in Uncategorized |