Jeff farnham, the owner of jts & co.
Today we're talking all about rent versus owning your own home.
Now i know sometimes it's a little difficult to pull that money together to begin with to purchase their first home.
Welcome to the show my friend.
Jeff farnham: yeah, thank you.
Glad to be here.
Troy: always great to have you here.
Last time you were on, we were talking about refinancing.
So we were talking about people who already owned a home.
Jeff farnham: yep.
Troy: now let's talk about people who rent versus buy.
Someone like me who's always moving around and never in one market longer than maybe two or three years, would you suggest buying or renting for someone like that?
Jeff farnham: well, buying is, to my opinion, always a better proposition, if it makes sense, right?
So, depending on purchasing power, depending on what interest rates are doing, relative to what rent factors are, relative to how long you're going to be there, does it make sense for you to buy?
If you're in a market where rents are $1,500 a month, $1,600, $2,000 a month, and mortgage rates are at 3.5%, 4%, then almost invariably you are going to be able to buy more house and have a lower payment than what you're going to have in rent.
Jeff farnham: so it could make sense to do that.
But conversely, if you're in a lower market, maybe with a smaller loan amount and rents are 1,000, 1,200 a month and rates are 7% or 8%, well, your payment might actually be a little more than what- troy: right.
Jeff farnham: so you have to weigh your situation out and look at it.
But home ownership brings so much to the table as opposed to renting.
Troy: and look, here's the thing also, we all hear that kids are staying at home longer to save money to be able to purchase their first home, right?
This ... jeff farnham: yeah.
Well, and that's historically what we've seen.
Jeff farnham: today as we've watched gen z and we watch millennials, we're seeing them buy earlier, earlier at 22, 23 s opposed to 28, 29.
Troy: what is the going concern when it comes to down payments for a home?
And do you believe if you do a zero payment at a higher interest rate to get into the market ... that's what i'm saying.
Jeff farnham: yeah, so a lot of people still have the misnomer, the misunderstanding, they've got to have this large down payment to buy a home, right?
Jeff farnham: that's not the case.
We have programs that allow 100% financing.
Then you couple that with a, well, then, i'm going to get a higher interest rate.
Jeff farnham: under our usda loan program, they track very closely with an fha rate, so you're going to still get a good interest rate and maybe not put as much down or anything down.
It would get where rates are and have been in the past several years, not putting as much down may more sense because depending on where you have your money invested, you may actually be making more on your money than what it's costing you by putting money down.
Troy: okay, now, i want to talk about rates now, adjustable compared to fixed.
I personally don't know the difference.
I know in australia, my guy said to me 20 years ago, "oh, you're just on a fixed rate."
Well, i didn't know what ... i just knew i was paying the same amount every month, because i didn't understand.
Explain to everyone at home the benefits of having fixed or an adjustable fixed rate.
Jeff farnham: all right.
A fixed rate means that the interest rate is fixed for your specified term.
Being a 10-year, 15 or 30-year term, that interest rate's fixed.
That principal and interest payment is never going to adjust on you.
Troy: whether it goes good or bad.
Jeff farnham: whether it goes good or bad, you're locked in to your rate, okay?
Now your payment could change depending on what happens with your taxes and insurance.
Jeff farnham: conversely, an adjustable rate mortgage is going to do just that.
It's going to adjust on a specified period.
Maybe it's a one-year adjustable, a three-year adjustable, a five-year adjustable.
Historically, an adjustable rate mortgage was good when, depending on where rates were, there used to be a pretty wide spread between fixed rates and adjustable rates.
So if you were going to be in the home for three years, taking it, and let's say rates were 5%, and you might get an adjustable rate for 3-1/2% for that three- year period, so it made sense if you knew, in fact, you were going to be moving during that time frame, right?
Jeff farnham: but right now the yield curves are so close together that there's very little difference between an adjustable rate and a fixed rate mortgage, all right?
So invariably fixed rate, in my opinion, is a much safer, predictable mortgage product.
Very quickly, and i've got to run, but tax benefits for owning your own home.
Jeff farnham: yeah.
So, i mean, you still have the mortgage interest deduction up to a certain percentage point.
You can write that off.
Your financial security on homeowners, and there's lots of benefits to owning a home.
And it's a great way to secure your future.
Jeff farnham: absolutely.
Troy: all right.
If you want to find out more information about jts & co.
Mortgage professionals, go over and give mr. jeff farnham a call.
He will help you and guide you.
And i love the idea about smaller down payments.
We appreciate you as always.
Jeff farnham: yup.
Troy: all the information's up on the screen, everyone.
Back after this short break.