Buy A Palm Springs Home, CA And Live There Free? Buying Vs. Renting Today

It’s a gimmick, right?  What’s the catch?  Hear this and take note:  There is no gimmick and there is no catch.  In today’s market with historically low interest rates and exceptional home values, it is possible to buy a home and live virtually for free if you are a renter.  Said another way, why make your landlord richer?

This really gets down to simple math!  Say for example you are now paying 1200.00 per month for rent.  That’s about average for a 3 bedroom home in many areas around Palm Springs and all that money goes to your landlord.  And let’s say you buy a home for around $150,000.00 which is MORE than possible in today’s real estate market with many going for a lot less.  Figure in other costs such as anual property taxes and insurance and the total is between$800.00 and $1000.00 per month depending on loan type.  Sound good so far?  

Let’s do the numbers…..

It Gets Better- Scenario #1 with 20% down on a Conventional loan

1. Home price $150,000
2. Downpayment: 20% or $30,000.00
3. Interest rate: 4.25%
4. Tax rate 1.25% of purchase price or $156.00 /month
5. Homeowners Ins: $75.00 /month
6. Total: $809.00

It Gets Better- Scenario #2 with 3.5% down on an FHA loan

1. Home price $150,000
2. Downpayment:  3.5% or $5,250.00
3. Tax rate 1.25% of purchase price or $156.25 /month
4. Homeowners Ins: $75.00 /month
5. Total: $993.00

Now it gets even BETTER!

Let’s figure in your approximate income tax savings.  In the first year, much of your payment for principle is interest is deductible as are the property taxes.  In scenario #1, that would be almost an $8000.00 deduction off your federal taxes which could put about an extra $100.00 month in your pocket.  Subtract that from your payment and then compare that to what you pay for rent and does it make any sense to rent?

And Better yet! More savings and equity growth!

While you live in the home, you will be able to deduct home improvements and over time, the home will grow in equity (increase in value) as well so that by the time you sell, your total const of living there just may be zero or even less!

Disclosure:  Your rates and terms may vary depending on your credit score or income tax rates.  Please consult team member Jeff Cosmos, our loan professional or John Pullin, CPA our team tax expert for more details.

Have some fun with the Mortgage and Affordability calculators included in this article and call our office for further information or to get started 

 

Rent Vs. Own A Home #1

Rent Vs. Own #2

Affordability Calculator