Buy vs. Rent in SOUTH el monte, CA: Is Buying a $799,000 Home the Right Move?

As a mortgage loan officer, one of the most common questions I receive from clients is whether they should buy or rent a home. It’s a crucial decision, especially in areas like South El Monte, California, where the real estate market is dynamic, and home values are steadily increasing. Today, let’s explore a practical comparison of buying versus renting a $799,000 home in South El Monte, using a 95% conventional financing option.

The Home Purchase Scenario

    • Home Price: $799,000
    • Down Payment: 5% ($39,950)
    • Loan Amount: $759,050
    • Interest Rate: 6.25%
    • APR: 6.397%
    • Loan Term: 30 years (fixed-rate mortgage)

    Forecasted Appreciation

    South El Monte is projected to see a 6.25% annual appreciation over the next nine years. This appreciation rate is a significant factor when weighing the long-term benefits of homeownership.

    Cost Breakdown: Buying a Home

    When you buy a home, your monthly mortgage payment will include principal, interest, property taxes, and homeowners insurance. Here's an estimated breakdown:

    • Monthly Principal & Interest: $4,676
    • Property Taxes (1.25% of Purchase Price): $832 per month
    • Homeowners Insurance: $100 per month (estimated)
    • Total Monthly Payment: $5,608

    Over the first nine years, you will have paid approximately:

    • Mortgage Payments (Principal & Interest): $504,912
    • Property Taxes: $89,856
    • Homeowners Insurance: $10,800
    • Total Payments: $605,568

    Building Equity and Appreciation

    One of the key advantages of buying a home is building equity. With a 6.25% annual appreciation, your $799,000 home is projected to increase in value over the next nine years significantly:

    • Projected Home Value After 9 Years: $1,358,329

    During this period, your mortgage balance will decrease as you pay down the principal, and the equity you’ve built will be substantial.

    • Estimated Mortgage Balance After 9 Years: $671,542
    • Estimated Equity After 9 Years: $686,787

Cost Breakdown: Renting a Home

If you choose to rent instead, your monthly rent will likely increase annually due to inflation and market demand. Assuming an initial rent of $3,500 per month with a 3% annual increase, here’s what renting could look like over nine years:

  • Year 1 Rent: $3,500 per month
  • Year 9 Rent: $4,444 per month
  • Total Rent Paid Over 9 Years: $438,904

Comparing the Financials

Now, let’s compare the two options after nine years:

Buying:

  • Total Payments Made: $605,568
  • Estimated Home Value: $1,358,329
  • Mortgage Balance: $671,542
  • Equity Gained: $686,787

Renting:

  • Total Rent Paid: $438,904
  • Equity Gained: $0

Additional Considerations

  1. Tax Benefits: Homeowners can benefit from mortgage interest and property tax deductions, which could lower your taxable income.
  2. Stability: Owning a home provides stability against rising rents and the opportunity to customize your living space.
  3. Upfront Costs: While buying requires a significant upfront investment (down payment, closing costs), these costs contribute to your equity.
  4. Maintenance Costs: Homeownership comes with responsibilities like maintenance and repairs, which can add to your expenses.


Conclusion: Should You Buy or Rent in South El Monte?

In South El Monte, with a projected 6.25% annual appreciation, buying a home could be a financially savvy decision if you plan to stay in the property for the long term. After nine years, the equity you build, combined with the potential increase in property value, makes homeownership a compelling option compared to renting.

However, personal circumstances, financial goals, and market conditions should also be considered. If you’re ready to explore your options further, I’m here to help you navigate the mortgage process and make the best decision for your future.

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.


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