Buying vs. Renting: Is Purchasing a Home at 1419 W San Bernardino Road, Unit F, Covina, CA the Right Move?

As a mortgage loan officer, one of the most common questions I receive from clients is whether buying a home is the right decision compared to renting. It's a significant decision, and understanding the financial implications over the long term is essential. Let's break down the numbers for a specific property: a $610,000 purchase at 1419 W San Bernardino Road, Unit F, Covina, CA, with 100% financing at an estimated interest rate of 6.25% and an APR of 6.397%. We'll also consider the forecasted appreciation in Covina, which is 5.27% per year over the next 9 years.

The Case for Buying

1. Building Equity: With 100% financing, you'll start with no equity in the home, but that changes quickly as you pay down your mortgage. Over 9 years, a 5.27% annual appreciation means your home’s value could increase significantly. Let’s look at the math:

Initial Home Value: $610,000
Estimated Home Value in 9 Years:
Using the formula: Future Value = Present Value * (1 + appreciation rate)^years
Future Value = $610,000 * (1 + 0.0527)^9 ≈ $960,000

That's a potential increase in your home’s value by around $350,000 in just 9 years. This appreciation contributes directly to your equity, in addition to the equity built through mortgage payments.

2. Mortgage Payments: At a 6.25% interest rate with an APR of 6.397%, your monthly mortgage payment (including principal and interest) would be approximately $3,750. Over 9 years, you'll pay around $405,000 in mortgage payments. While this might seem high, remember that a portion of these payments goes toward building equity in your home.

3. Tax Benefits: As a homeowner, you can take advantage of tax deductions, including mortgage interest and property taxes. While the exact amount varies based on your tax situation, these deductions can significantly reduce your taxable income, making homeownership more affordable in the long run.

The Case for Renting

1. Flexibility: Renting offers flexibility that owning a home does not. If you anticipate a job change or relocation within the next few years, renting may be a better option. Renting also frees you from the responsibilities of home maintenance and repairs, which can be both time-consuming and costly.

2. Fixed Costs: Renting can offer more predictable costs, especially in the short term. While rent prices can increase over time, you won't have to worry about property taxes, homeowner’s insurance, or unexpected repair costs. However, these savings come with the caveat that you’re not building equity.

3. Rent Costs in Covina: Assuming average rent for a similar property in Covina is around $2,500 per month, over 9 years, you'd pay approximately $270,000 in rent. Unlike mortgage payments, this money doesn’t contribute to any equity or long-term financial growth.

Long-Term Financial Impact

After 9 years, if you decide to sell your home, the potential value of your home could be around $960,000. Even accounting for selling costs (typically 6% of the home’s value, or about $57,600), you’d walk away with significant equity—potentially around $500,000 after paying off the remaining mortgage balance.

In contrast, renting would leave you with no equity or asset growth after 9 years. While renting may seem more affordable monthly, the long-term financial benefits of homeownership can outweigh the initial costs, especially in a market like Covina where property values are expected to appreciate steadily.

Conclusion

The decision to buy or rent ultimately depends on your financial situation, long-term plans, and personal preferences. However, if you're planning to stay in Covina for several years, buying a home at 1419 W San Bernardino Road, Unit F could be a solid financial investment. The combination of property appreciation and equity growth could provide substantial long-term benefits compared to renting.

If you have more questions or want to explore your mortgage options further, feel free to reach out. I'm here to help you navigate the path to homeownership with confidence!