By Brian Peck,

President Nona Mortgage, LLC

There are some industries and businesses that have a built in sustainability that will ensure that the services of competent professionals are always in demand. The Food and Restaurant industry, everyone has to eat. The Clothing industry, everyone has to wear something. The Housing industry, everyone needs a place to live. These come from the basic needs of every individual for food, clothing and shelter. If there were a fourth need, I am sure it would be healthcare. Like the saying goes, you don't have anything if you don't have your health.

Choosing your location of where you live revolves around 2 key determinants: employment location, and lifestyle. Choosing how you pay for that location coincidentally also involves only 1 of 2 choices - Rent or Own.

The benefits of renting are widely known which is why almost 40% of Americans do rent their homes. Renting allows a certain freedom of not being locked to any location too long. If the housing market flops, you are insulated as there is no market risk. Home maintenance costs are greatly reduced and are often paid by the landlord. Renting does not require a large down payment and the application process is usually simple, quick and easy. Even with the worst credit imaginable, with a steady job, you will be able to find a location to rent.

Home ownership on the other hand has just the opposite demands. The costs to entry can be a large down payment and exhaustive credit review for loan approval. The home value can swing up or down. The costs to maintain the home from painting, landscaping, repair and everything in between can drain resources. If you want to move, you have to either become a landlord yourself or go through another exhaustive process to sell the property. Yet, we see that 63% of households are owner occupied residences. So there must be a reason why.

Home ownership has been at the heart of the American dream since before the founding or our country. In the days of kings, most of the land was held by the wealthy. Owning land gave you a sense of worth and importance. It is not hard to understand why during the expansion of our country many made the expensive and dangerous journey with much sacrifice, just to have the opportunity to own their own land. The rewards of home ownership can often outweigh the risks.

Let's look at the perspective of a landlord. Rents are set to cover expenses including loans and other maintenance costs. They pass on the mortgage payment to you the renter. They get the tax deductions for interest you are paying. They earn the principle portion of your rent payment as it pays down the loan. They also benefit from any equity increase in the property. These are the same benefits you achieve through your home ownership. Take a $2,000 rent payment. You pay the rent and your bank account lowers by $2,000. For the same home, the mortgage payment might be $2,000. After removing interest, taxes and hazard escrows will still have a portion, say $500, that goes to principle. Rent, $2000 gone. Home ownership, saving $500 a month, same payment.

Home ownership with the equity from your payment and upside increase of your property value constitute the bulk of most household's net worth. For better or worse, real estate has been a consistent wealth and income generator for Americans. The graph below taken from census info in 2015 shows that trend as Americans grow older. Another graph shows an even larger disparity in net worth of homeowners compared to renters. The statistics and figures will bear out over the long run that home ownership will beat out renting.

(See Median and Homeowner net worth graphics above)

As a mortgage broker, there is a lot that can be done to help get clients into a home. Sometimes the task can be relatively simple with great credit and down payment. The borrower can take advantage of some of the lowest rates ever. Other times you need a broker with a lot of experience and knowledge to go the extra mile for a client. Take an all too common example of a family heavily impacted by the housing crisis. Their credit is shot, they had a foreclosure and they are currently renting. Believe it or not, Nona Mortgage, LLC was able to find options available for financing. The lending terms might not be the best but we were able to help the borrower determine that the cost of rent versus the cost of the mortgage payment were going to be almost the same even with an elevated interest rate. Additionally, the difference in the amount of interest to be paid from the higher interest rate and a normal rate was less than the anticipated property value increase on a monthly basis. The higher interest is fully tax deductible and property was selling below market. It was a great buy for the client and in a few years, when their credit has recovered, they will be able to refinance the home to a lower rate if available. And best yet, they are no longer renting.

If you have any questions about how you can achieve the dream of home ownership or reduce your interest rate through refinance, please contact me and I will be happy to help. We serve all clients with our company slogan in mind, One Family, One Home at a Time!