Vail Daily column: Don’t give up on purchasing your own home
If you would like to live and work in our wonderful community long term, and you’re getting hammered by your landlord — high rent in relation to the property’s location, features and benefits — don’t quit on your home ownership aspirations. At a minimum, get up to speed on what’s going on in the local mortgage lending environment, how to enhance your credit score and the financial benefits of home ownership. Don’t let fear of the unknown hold you back.
Attractive loans are available for as little as 3 to 5 percent down and closing costs can often be built into the loan amount and we continue to experience historically low interest rates.
The big four on home ownership can be summarized as the CETA formula. C is for control; as a homeowner, you control your housing circumstances and you are no longer at the mercy of your landlord. E is for enjoyment; you become a homeowner, you fix up the property as you see fit and begin to fulfill your lifestyle preferences.
T is for tax benefits; the interest portion of your mortgage payments and your property taxes are deductible for federal income tax purposes and that has a favorable impact on your state income tax liability as well. You’ll find the math is pretty straightforward to compare your current total housing cost, including utilities, to your after-tax cost as a property owner. The result of the analysis may surprise you in a positive way.
And finally, A is for appreciation, but this is where you need to slow down and pause, as I would not encourage any of my clients to count on appreciation. There are just too many elements you will have no control over — the trajectory of the global and national economy, interest rates and the supply and demand circumstances related to your neighborhood and property at the point in time you decide to sell to trade-up, relocation to take advantage of a job offer, etc.
Keep in mind that when you sell a property, the closing costs are significant and they take away from both appreciation and the equity you will take away from the sale and closing. There is a big difference between the contracted sales price and net proceeds. In many instances, net proceeds are about 7 percent below the contracted sales price.
Bottom line, a batting average of 750 — three out of four home ownership benefits — is pretty darn good. And as a renter, you won’t even get into the batter’s box. You will be surprised at the number of current active listings which may be in your wheel house from an affordability perspective. A $300,000 starter condo, with modest Home Owners Associationfees, provides a huge step forward as compared to renting!
Kent Petersmeyer is the managing broker for The Cascade Team based in Edwards. He can be reached at firstname.lastname@example.org and 970-456-8203.