Buy vs. Rent: Is Purchasing a Home in La Habra, CA the Right Choice?

As a mortgage loan officer, I often encounter clients who are torn between buying a home and continuing to rent. The decision is especially critical when considering a purchase in a market like La Habra, CA. If you're contemplating whether to buy or rent a home priced at $768,777, this blog will help you make an informed decision by comparing both options over the next nine years, with a forecasted annual appreciation of 5.44% and an estimated interest rate of 6.25%.

Understanding the Purchase Option

When you buy a home, you are building equity—a financial asset that grows as you pay off your mortgage and as the property appreciates in value. Let’s break down what buying a home in La Habra might look like:

• Purchase Price: $768,777
• Interest Rate: 6.25%
• Loan Term: 30 years (typical fixed-rate mortgage)
• Down Payment: Assuming a 20% down payment, that would be $153,755.40.
• Loan Amount: $615,021.60
• Monthly Mortgage Payment: Approximately $3,787. This does not include property taxes, homeowners insurance, or other potential costs like PMI (Private Mortgage Insurance) if your down payment is less than 20%.

Total Costs: Approximately $564,156

Over nine years, with a 5.44% annual appreciation, your home in La Habra could increase significantly in value. Here’s how:

• Year 1: $810,599
• Year 3: $903,918
• Year 5: $1,008,750
• Year 7: $1,126,572
• Year 9: $1,258,027

By year nine, your home’s value could be around $1,258,027, an increase of approximately $489,250. This equity, combined with the principal you've paid down on your mortgage, represents a substantial financial asset.

Understanding the Rent Option

Now, let’s consider the alternative—renting. The rental market in La Habra is robust, and while renting offers flexibility and less responsibility than homeownership, it doesn’t build equity. Assuming the monthly rent for a comparable home is $3,500 (a typical rate for a home in this price range), let’s see how the numbers stack up over nine years.

• Total Rent Paid Over 9 Years: $3,500/month x 12 months x 9 years = $378,000.

Renting also involves potential rent increases, maintenance costs that might not be covered by your landlord, and no ability to capitalize on property appreciation.

Buy vs. Rent: The Financials

Let’s break down the key financial outcomes:

• Equity Built by Buying: By year nine, your home’s value might have increased by $489,250. Plus, you'll have paid down a portion of your mortgage principal, further increasing your equity.
• Cost of Renting: Over nine years, you’ll have spent $378,000 on rent, with no equity or ownership to show for it.
• Total Cost of Homeownership: While your mortgage payments might total around $409,116 over nine years, this includes both principal and interest. The appreciation of your home value far outweighs the cost of your mortgage payments.

Final Thoughts

If you’re planning to stay in La Habra for the long term, buying a home can be a financially sound decision. The potential for significant equity growth, coupled with the benefits of homeownership, can provide both financial security and a place to call your own.

On the other hand, if you value flexibility, lower responsibility, and aren’t ready to commit to a long-term stay, renting might be the better option. However, keep in mind that renting won’t offer the financial benefits that come with property appreciation and equity building.

Ultimately, the decision to buy or rent should be based on your personal circumstances, financial situation, and long-term goals. As a mortgage loan officer, I’m here to help you navigate these decisions and find the best financial path for your future. If you’re considering buying in La Habra, I’d be happy to discuss your options further and help you get started on the path to homeownership.

David Delgado

NMLS# 349079 • Freedom Choice Lending

Office: (562) 281-6163

www.FreedomChoiceLending.com

Click Here To schedule a 15 minute loan consultation

The terms are based on 6.379% APR.