To Rent or to Buy: Answering The Age Old Question of "getting" Your Home
Joseph V Leech; Sr Associate: United Financial Freedom
To get right to the point: There is no absolute answer other than “it depends”. A solid argument can be made for each, again “depending” on one's circumstances, feelings, and goals.
The perspective of this article comes from the belief that a vast majority of readers will at some time in their life... usually the “senior years”... desire to have both a home that is paid for and at this time in their lives they will no longer be working or desiring to trade time for dollars They would expect to have an income that could allow them to live at least at the same quality of life as when regular “work” income was there.
In other words, “retire”.
Of course, “retire” means different things to different people, and it seems as if it's harder and harder to create an income that will meet those needs when one can either no longer work or wants to.
Who is this article for? Primarily anyone who is committing money monthly to provide for shelter or “housing”. Most likely Americans. People who are open minded and ideally looking for answers..People who can have a long term view of the future. That said, lets move on..
The Case For Making the Rental Choice
For many people, there is no actual choice: Sustained income, debt to income ratio, and other factors will not allow the person to qualify for a mortgage. In the case where the sustained income (and rent being paid) would allow one to make regular mortgage payments, obstacles in the form of down payment and closing costs get in the way even if otherwise a person could qualify for mortgage.
Surprisingly, there are options in various forms of help such as grants... but many of the “eligibles' are not aware of these. For the record, the author of this article is aware of options and grant opportunities that the vast majority of Americans that this group of people might qualify for. One of the misconceptions that some people hold is that things like grants are not available to people of “substantial” income as the “old” conception is things such as grants are there to assist those of low income only.
Other than these circumstances, some people can afford the down payment, closing costs, and mortgage payments, the choice is still made to be a renter.
Some reasons your author hears are “no worries about maintenance” and flexibility. The society of the 2020s is quite different than even just 10 or so years ago, particularly in “white collar” professions (assuming here we are talking about those with jobs vs the self employed).... Back then...... OK, WAY back then.... a person would start a job and work it in one location until retirement; or, if there were to be a transfer, the company would help a home buyer with not only moving expenses, but things like bridge loans. Those days are long gone.
Today.. employees...seek upward mobility and will move quickly in many cases if a new job opportunity surfaces. This is particularly true of people who have no children and concerns about moving “the kids” from one school to another.
Being a home OWNER often represents an impediment to consideration of a new job requiring relocation, and to provide maximum flexibility, rental becomes the most logical choice.
Of course there are down sides and sacrifices such as being able to remodel, etc... but instead of remodeling a home (think house, apartment, etc).. when you are a renter.. you can move to one that has the floor plan, etc you want.. and generally without the mess! As renter and if you want to move, you have no selling inconveniences or costs such as sales commissions, and of course for the new home... closing costs, etc.
As we said earlier, there's certainly reasons to support the rental decision
The Case For Being A Home OWNER
The principal perspective of this choice evolves as part of the bigger picture: Long term planning relating to the ability to retire...which means the house or property you own is viewed as an asset, and treated as such.
If we can agree on that scenario, then we need to develop our strategy and start to consider our house/home exactly like that: an asset whose value far exceeds simply being “shelter”
In general terms, we want to take that house payment and get rid of it in the fastest possible way, and as soon as this is done, take that mortgage payment and begin to invest it in the most affordable and suitable financial investment possible.. While there's also no “one size fits all” answer to whatever that is, we have a couple very reasonable ideas that will fit a large number of people.
Practically speaking, the majority of people (at least the ones I know) have a budget of some sort, and we want to get the most out of that as possible.
As we develop the thoughts in this paper, we are going to focus on the very common fixed, 30 year mortgage. Regardless of the term (other than for the example of this paper), the home owner generally has a fixed amount of dollars committed to be paid every month for the next 30 years (or whatever the term may be). If taxes and insurance are wrapped into the mortgage payment, we acknowledge that there can be some variation year to year, and of course if one is on some kind of variable plan... there's still a planned and scheduled monthly outgo.
The 15 year mortgage is quite popular and probably would produce a faster pay off.. .but at the compromise of having a higher monthly payment. While that may be affordable for many people, the trade-off may be an unacceptable level of flexibility to the budget.. so while it could be afforded, it's bypassed in favor of the 30 year instrument and the lower monthly costs..
All kinds of people in the financial world recognize that many want want get rid of the mortgage faster, and all kinds of techniques and tools have been developed, from the biweekly to others. When rates drop, the re-finance option is popular. Unfortunately this option may end up where the buyer puts even more money out to buy the house!
The sad truth, which is not even a secret, is that most of the opt don't make a significant difference or do so with significant compromises.
Your key “take away” from this article will be in the following question:
IF THERE WAS A FINANCIAL TOOL AND PROCEDURE THAT WOULD ALLOW YOU TO SIGNIFICANTLY REDUCE THE PAYOFF TIME OF YOUR EXISTING MORTGAGE WITHOUT RE-FINANCE AND WITHOUT EVEN ADDING ANY EXTRA PAYMENTS TO YOUR BUDGET..would you at least want to know about it? WHAT IF THIS WAS A TOOL THAT SIMPLY MADE YOUR MONEY WORK DIFFERENTLY AND MORE EFFECTIVELY? IF YOU LEARNED THERE WAS SUCH A TOOL, YOU COULD BELIEVE IN IT, and THE MATH was CLEAR); IT WAS LEGAL, AND YOU COULD EASILY ACCESS IT....
WOULD YOU DO IT?
The answer to that question should be obvious... but the sad truth is we are all so conditioned to “schemes” half of the people or so would refuse to even explore the subject or act on it.
They may consider asking a friend or someone whey consider wise in financial knowledge... who actually has no knowledge or experience with THIS tool.. gives their “friend” a warning “:stay away”.. and they let it pass by.
You may be thinking, “Joe (that's my name, I'm the author and one of the few people you may eve know or meet who can guide you and help you).. .you may be thinking..
“Sounds first like a bait. What is this “significant stuff”?
It's a tool and every one has a little different picture, but in general, we'll take that 30 year mortgage, along possibly with other debts like a car, student loan,etc, and get it paid off in 12-14 years.
Not refinanced, not reorganized. .. GONE!.
The one “trick” or gimmick: We're going to give you a specific financial road map (one that can accommodate detours as we know both incomes and expenses can change over those years).. but the trick is you must have the dedication and self discipline to follow a proven system. We know it works, and we'll guarantee the results as long as you do your part following the very reasonable system.
While making the case for ownership.. or buying... one other obvious tip: Spend as little as possible buying the property.
Of course you know to to that, but there's possibly one thing you never thought of.. simply because you're not aware of it.
The very first thing we are going to do if you are considering the purchase of a new home is to get you a grant that will meet some of the costs of the down payment and closing costs. As of the writing of this article, one totally free, non repayable grant, offering grants of up to $48,000 is available from a national non profit organization, FundMyHome.org. (Link to specific information: http;//leech.fundmyhome.org). (There is not even an application cost)
Their mission statement on this web site is clear: Help 1,000,000 renters become home owners, and the reason is that a city or town of home owners provides for a more stable community.
The goal of this organization is to get people into nice homes where they can afford to make the mortgage payments but because of debts such as student loans, etc can not get the savings together for the down payment. In fact, this organization has no upper income limits. There's more to it than this of course, but we would suggest it would be worth your time, if you are leaning to home ownership, to checking it out at https://leech.fundmyhome.org. Everything you need to know is there.. and this is not theory.. Yours truly is not only the author of this paper but a certified grant specialist.
But for now... let's get back to the subject of reducing the mortgage that you may currently have or get as you become a new home owner.....
Moving on and anticipating some of your questions... Are there any tricks, gimmicks, or compromises?
We have addressed the one: The discipline to follow a plan and budget. Again, the PLAN has flexibility built in to accommodate for changes in the budget, both in income and outgo.
Are there any other tips or tricks?
The answer is a resounding “NO”.
This is all built around commonly AVAILABLE knowledge and banking principles.. if you know where to look and think about them.
If then these are so common, why are they not taught and shared? Generally known facts?
Again the answer is simple: Conflict of Interest first from the organizations best qualified to teach them: banks and other lending organizations.
The conflict? The tools all develop ways to minimize interest (payments) and “interest” is the “bread and butter” or primary income of these institutions!
Secondly, while the knowledge and procedures are built on common math principles the implementation or practice of these requires a rather complex set of calculations.
Yes, anyone with knowledge , time and expertise in working with spread sheets can make this work but first of all, it's very time consuming.
Consider that in the lifetime of the mortgage one's income and/or expenses could change monthly, going into a spread sheet and updating it is a very tedious and error prone process.
Because of this the “institutions” had been slow to develop it.. . That is... U N T I L.....
The advent of the practical home use computer and the ability to perform these sophisticated calculations with only the simplest input that virtually anyone can do.
To date, and to the best of our knowledge in the USA only two firms have developed (and market) this product.
The company we are associated with, and have been, for over 12 years first started with general presentations in paper flip charts or power point presentations, and then using a modified spread sheet template which was slow and hard to work.
After about two years, combined with a slow down in the mortgage market and economy, the company essentially went into hibernation in terms of marketing, but focusing on development of a proprietary software program that anyone can access and use with only the most rudimentary training and help.
HOW DO YOU GET THIS PROGRAM and LEARN MORE?
If you want to get right to the chase, the short answer is contact the author and arrange a phone or zoom appointment.. but let's cover that learning process in a little more detail.. .and YES! We know this IS a long paper with detail. But we don't want to cut corners when it comes to numbers and your money.
Let's draw an analogy of someone buying a car.
You can have a basic interest and want to know .. * Will it get you from point A to point B? * How does it look? Feel? Drive? * What are the costs of Car A compared to Car B? Will it serve the function of just transportation, or do maybe I need to haul something.. in which case will a Pick Up truck or SUV be better?
You get the answers to these questions, make a choice.. then maybe do some research as to cylinders, fuel injection or injectors? Size of tires and are brakes disc or drum? Headlights LED or incandescent?
OR...
You could start your research on all the technical specs, do the research, then find the car that meets these specs, and go see how it otherwise “fits”.
We have the same process you can follow
You can start from a performance objective, first learning IF this will work for you, and what it will cost (there is a cost which relates to the software which in turn is developed on a custom basis based on complexity of debt). It will not work for everyone for a couple of reasons: One is there may not have enough resources to cover the debt. The fundamental rule is that there has to be more income than outgo.
The other reason may be strictly a personal preference. Our software is built to compare and work with a consumer that is generally paying their debt off following conventional amortization methods, and some people have other highly specialized personal ways to convert their debt into wealth that essentially only they can manage and the procedures and not duplicatable.
But the only way to find out if this is a tool for you.... is to run the numbers and find out if the tool IS for you.
This all starts with a free consultation, generally on line or via zoom (personal or in person pre covid, still available on individual consideration)
In the consultation you personal debts and finances are entered, but personal data such as account numbers are never requested.
The outcome is the outline of a specific plan based on the financial snapshot in the moment you provided. A quote for your customized software program is provided.. and now we back off to give you time to formulate other questions or decide: Let's Go or “Thanks.. not for us”. Again, we recognize this this is a possibility. The “numbers” must “sell” you; our people won't.
The Other Starting Point?
Just like buying a car. Get the technical background. If his describes you, here's your option: Log on to HERE (https://www.moneymaxaccount.com/jvl/Videos)and you'll get a great e book and two videos. Additional references are in the book.
Gives you the theory and technical, but does not run your numbers for you, and as we said, it might not even work for you.. .and in fact, until you have YOUR consultation or evaluation, the question becomes “Why Take the Time first?” But we know some people who prefer to do things this way... we've been personally doing this over 10 years and we respect those opinions.
So.. which game plan appeals the best to you? You can contact us now via email or txt to arrange for an evaluation or consultation (generally we need one week advance to schedule, and that can be any time day or night. When there is a couple in a marriage and both parties are involved in financial decisions, we ask both parties be present)
PHASE THREE
Phase three is the final step where we convert the debt(s) into wealth. This can only be done if we have something to convert.. the money being previously devoted to shelter costs which we have been referring to as the mortgage.
Of course we recognize there will always be shelter costs , some of which have been attached to some mortgages which had provision for escrows.. taxes and insurance. But the largest element.. the true debt cost has gone away.
With proper planning and some control and a good economy.. the basic mortgage expanse may never have to be significantly increased.
You start with the “starter home”... which you live in 10 years and outgrow. With luck.. and much of it may be truly luck.. the value of the home appreciates. If you planned your purchase a good as possible, you did buy in a neighborhood or city where this is along term trend.
You sell this home but you shop very carefully so as to NOT right up front give away x% in real estate s ales commissions.
You take the equity .. the money you have saved in interest plus the gain, and now put it into your larger home... and even if you increase the cost of the new home a very significant amount, your new mortgage payment will not increase a great deal.. You can negotiate out a new 30 years term.. but your software is a lifetime purchase and has the ability to again shrink this back in.
You are now in this house 15 more years, your children are in their 20s and you can think about downsize.
But we have been reducing a mortgage for over 20 years even with a second home. But let's think for a moment that first house suited you for 12 years and you paid it off! Your house payment, P and I, was $1000, so now you put that $1000 that is GONE into an investment for 18 years. Let's be very conservative.. we'll say the investment pays only 1% You can find financial calculators all over the internet that will tell you what that will grow into. Just ask Google “What will $1000 a month grow into if invested for 18 yrs paying 1% compounded quarterly”.
We strongly suspect you'd find a reasonably risk free investment earning a higher return.
In our appraisal for you, we'll take your projected savings and show you what your numbers could be.
DO WE MAKE INVESTMENT RECOMMENDATIONS?
In general, no. First, each person is quite different. Secondly, to work in this market, we would have to be licensed and appointed by each state we work in.
Next, it's challenging enough to know all the options from annuities to mutual funds etc. We feel this is best done by a professional who specializes in those types of products and with prospects suitable to you are based on health, location, age, risk tolerance and more.
If you do want something to consider in very general terms we would suggest you look at Life Insurance Products... and you may have one now. Narrowing it down further, we suggest you get to know the I U L type product.
There are a couple benefits that you may not otherwise be familiar with. Of course, everyone is familiar with the OLD purpose of life insurance.. to provide a death benefit.
But nearly all the newer (whole) life insurance products also offer “Living Benefits” and these range from a form of a disability income source, to funds to cover an experimental cancer treatment not covered by your health insurance.
The third benefit may the the greatest, even eclipsing other options: INCOME TAX FREE RETIRMENT BENEIFTS.. substantial with only a $1000 per month premium for 18 years (you can determine at what year you want to stop payments.. and still continue to have both a death benefit and grown your retirement nest egg).
On request, and with collaboration with a agent/broker licensed in your state, we'll be happy to show you an illustration that's suitable to you.
The downside? It is Life Insurance and you must physically qualify for a policy...but on the other hand, and when you have a vested interest, you could do a plan on a family member such as a spouse who could qualify.
SUMMARY AND SHORT CONCLUDING COMMENTS
We have made the argument and discussion for home ownership viewing from the perspective of not being just shelter.
As a renter, you'll have outgo for shelter all of your life (unless you move in with a relative, become a ward of society).. but in all probability you will not have had money to divert into the longer plan... retirement
Using tools to rapidly eliminate a mortgage and in turn redirecting the use of the money, you can provide for a retirement, truly converting a debt to wealth.
It starts with making the decision to acquire your first residential property whether a condo, a stand alone home, then thinking outside the box to pay it off well ahead of the banks plan.
If you currently have a mortgage, even with maybe only 50% of the term remaining,using the practices and tools outlines, you can still save substantially.
Will you make the call (or text) to schedule your free and no obligation analysis?
PS.. for mortgage brokers: Adopting this tool to help your clients and prospects can help you grow your business simply at an exponential rate as your primary source of business is referrals.. and as you help people who you helped with t mortgage in the first place now get it done in ? the time.. would you believe they become your excited new sales and referral source? Contact me for how this can work for you.
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