It's no secret that Seal Beach possesses a charm that attracts people who want to embrace the small town lifestyle. Maybe it's the quaint Main Street and businesses, the picturesque pier or the award-winning school district. Whatever draws people here, each is faced with the need to either rent or buy a Seal Beach home.
It's not uncommon this time of the year for a half-dozen or more people to walk into my office and inquire about living arrangements. The conversation usually starts with the price of rentals and progresses to the cost to purchase. A little-known fact that surprises many is that when the real estate market declines, the demand and price for rental housing rises.
This is not to assume that it's cheaper, in all circumstances, to own rather than rent. But there are situations in which one choice can be more cost effective. An easy way to illustrate this is by comparing the cost of a 2-bedroom home for sale and a 2-bedroom home for rent. We'll also look at a 3-bedroom home for sale vs. one for rent.
The market rent on a 2-bedroom home is presently $1,800 - $2,250 monthly. According to Angela Comstock of CLS Financial Services, if you purchased the 2-bedroom home at 246 17th Street for $525,000 using FHA financing (3.5 percent down) your principal and interest payment would be $2,424.03 at a rate of 3.875 percent. Purchasing the same home with conventional financing of a 20 percent down payment, your principal and interest payment would be $2,020.99 at a rate of 4.125 percent.
For families in need of a 3-bedroom home, market rents are $2,650 - $3,100 monthly. If you purchased the 3-bedroom home at 750 Catalina Ave. for $740,000, Angela's scenario using FHA financing (3.5 percent down) shows a principal and interest payment of $3,393.64 at a rate of 3.875 percent. Switching to 20 percent down payment and conventional financing scenario, your principal and interest payment would be $2,979.31 at a rate of 4.5 percent.
Aside from the obvious benefits of owning your own Seal Beach home, you’re able to deduct the property tax and mortgage interest on your tax return. The examples above take into consideration several factors, so it's important to talk to a mortgage professional about your specific financial scenario before shopping for a home. Depending on your credit score and loan program, among other factors, the APR can vary from 4.88 percent - 6.102 percent.
If you are trying to decide whether to rent or buy, start by getting informed on the local real estate market. A good online resource on homes for sale and recently sold is www.SealBeachHomeValues.com. The more information you have, the more educated your decision.