Buying vs. Renting in Altadena, Ca: Is Buying a $1,188,000 Home the Right Move?

When considering the purchase of a home in Altadena, California, at a price point of $1,188,000, it's essential to weigh the benefits of buying versus renting, especially when factoring in long-term financial outcomes. With an estimated interest rate of 6.25%, an APR of 6.397%, and 95% conventional financing, the decision becomes more intricate. Let’s explore how this choice could play out over the next nine years, including the forecasted appreciation of 5.54% per year in Altadena.

The Costs of Buying

  • Initial Costs:
    • Down Payment: With 95% financing, your down payment would be 5%, which is $59,400.
    • Loan Amount: Your loan would cover the remaining 95%, which totals $1,128,600.
    • Closing Costs: Expect to pay 2-5% of the purchase price, ranging between $23,760 and $59,400.
  • Monthly Mortgage Payment:
    • Principal & Interest: Approximately $6,944 per month.
    • Property Taxes: Estimated at 1.25% annually, or about $1,238 per month.
    • Homeowners Insurance: Estimated at $100-$200 per month.
    • Mortgage Insurance: Since the loan is above 80% LTV, mortgage insurance could add another $300-$400 per month.
    Total Monthly Payment: Approximately $8,582 - $8,782, including taxes, insurance, and mortgage insurance.

  • Equity Growth:
    • Home Value Appreciation: With a 5.54% annual appreciation rate, your home could increase in value to approximately $1,954,233 by the end of 9 years.
    • Principal Reduction: Over 9 years, a significant portion of your mortgage payments would go towards reducing your principal balance, building equity.
  • Net Worth Impact:
    • Home Equity: At the end of 9 years, your equity could be around $1,134,176, assuming property value appreciation and principal reduction.
  • The Cost of Renting

      1. Monthly Rent: The average rent for a comparable home in Altadena could be around $4,500 to $5,500 per month, depending on the property's size, location, and amenities.
      2. Rent Increases: Assuming a 3% annual rent increase, your rent could rise to approximately $5,852 to $7,151 by the end of 9 years.
      3. Total Rent Paid Over 9 Years: This would amount to roughly $588,600 to $711,900, without any return on investment.

      Comparing the Two Options

      • Total Costs: Over the 9 years, owning the home would result in higher upfront and ongoing costs compared to renting. However, a significant portion of these costs would contribute to building equity and wealth through appreciation.
      • Wealth Accumulation: By purchasing, you stand to gain substantial equity, potentially amounting to over $1.1 million by the end of the 9-year period. In contrast, renting results in no equity accumulation and a potential loss of nearly $600,000 to $700,000 in rent payments with no financial return.


    Conclusion: Should You Buy or Rent in Altadena?

    While the monthly expenses of owning a home in Altadena might seem steep compared to renting, the long-term financial benefits are substantial. With the appreciation rate at 5.54% annually, the equity you build through homeownership can significantly enhance your financial future. Renting may offer short-term savings, but buying in a growing market like Altadena provides a solid foundation for long-term wealth.

    As your mortgage loan officer, I am here to guide you through this decision, ensuring you understand the financial implications and opportunities that come with owning a home. Let's work together to make the most informed and beneficial choice 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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