When considering whether to buy or rent a home in Fullerton, California, there are several factors to weigh. With the median home price at $825,000 and an estimated mortgage interest rate of 6.25%, it's essential to understand the long-term financial implications of both renting and buying. As a mortgage loan officer, I'll break down the numbers to help you make an informed decision.
Home Price: $825,000
Interest Rate: 6.25%
Loan Term: 30 years
Down Payment: 20% ($165,000)
Loan Amount: $660,000
Monthly Mortgage Payment:
With a 6.25% interest rate on a 30-year fixed-rate mortgage, your monthly principal and interest payment would be approximately $4,061.
Property Taxes and Insurance:
In Fullerton, property taxes are around 1.1% of the home’s value annually. This would amount to roughly $9,075 per year or $756 per month. Homeowner’s insurance typically costs about $1,200 annually, or $100 per month.
Maintenance and Other Costs:
It’s also wise to budget for maintenance, repairs, and other homeowner costs. A good rule of thumb is to set aside 1% of the home’s value annually, which would be about $8,250 per year or $688 per month.
Total Monthly Cost:
When you add it all up, your total monthly housing cost would be approximately $5,605.
Renting in Fullerton varies depending on the size and location of the property. Let’s assume a comparable property would rent for about $3,500 per month.
One of the key benefits of homeownership is building equity through property appreciation. Fullerton’s real estate market is expected to appreciate at a rate of 5.56% per year over the next nine years. Here’s how that would impact the value of your home:
Home Value After 9 Years:
With a 5.56% annual appreciation, your $825,000 home would be worth approximately $1,348,307 after nine years.
Equity Build-Up:
Over nine years, you’ll have paid down a significant portion of your mortgage principal, adding to your equity. Assuming you make standard payments, you would have around $210,000 in principal remaining, meaning you’ve built approximately $1,138,307 in equity ($1,348,307 - $210,000).
Renters don’t benefit from appreciation or equity build-up. However, they do avoid the costs of maintenance, property taxes, and homeowner's insurance. Let’s break down the cost of renting over nine years:
Total Rent Paid:
At $3,500 per month, you would pay $378,000 in rent over nine years. This money doesn’t contribute to building equity or ownership.
Buying:
Renting:
While buying a home in Fullerton requires a larger upfront investment and higher monthly payments, the long-term financial benefits are clear. After nine years, you could potentially build over $1 million in equity, thanks to property appreciation and principal repayment.
On the other hand, renting might be more affordable in the short term but offers no return on investment. Renting also leaves you vulnerable to rent increases over time, while owning a home with a fixed-rate mortgage provides stability in your monthly housing costs.
Conclusion
If you’re planning to stay in Fullerton for the long term, buying a home at $825,000 with an interest rate of 6.25% is likely a smarter financial move compared to renting. You’ll build substantial equity, benefit from property appreciation, and enjoy the stability that comes with homeownership.
However, it’s essential to consider your financial situation, lifestyle preferences, and how long you plan to stay in the area. As always, consulting with a mortgage professional can help you navigate these decisions and find the best option for your unique circumstances.
David Delgado
NMLS# 349079 • Freedom Choice Lending
Office: (562) 281-6163
Click Here To schedule a 15 minute loan consultation
The terms are based on 6.379% APR.
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