Renting vs. Owning a Home in California: The Fixed Mortgage

This is the second part of our discussion on renting versus owning a home in California, in 2017. In part one, we looked at a monthly cost comparison and determined that renters in California can often own a home without a significant increase in their monthly costs.

Today, we’ll look at another benefit of buying a home versus renting in California. It has to do with a fixed-rate mortgage loan.

In short, people who buy a home in California using a fixed-rate mortgage loan have a lot more control over their monthly housing payments, compared to someone who rents a home or apartment.

Renting vs. Owning in California: A 2017 Update

Rent prices in California have risen steadily over the last few years, creating housing affordability issues for some residents. And while we can’t predict the future, there is a good chance that rents in many cities will continue to rise through the end of 2017 and into 2018.

This is one of the key disadvantages of renting versus owning a home in California. Unless you live in a building that has rent control, there is always the possibility that your monthly rental rate will rise over time.

When buying a home in California, on the other hand, you have a lot more control over your monthly housing payments. For instance, you could choose a fixed-rate mortgage loan so that your interest rate stays the same for as long as you keep the home.

This means your monthly payments will more or less remain the same as well. It’s one of the key benefits of owning a home in California, versus renting.

‘Locking’ Your Rate with a Fixed Mortgage Loan

A fixed-rate mortgage loan is exactly what it sounds like. It is a type of California home loan that carries an unchanging interest rate. The rate you receive when you first take out the loan will stay with you for as long as you keep the mortgage (even if you keep it for 10, 20 or even 30 years).

Granted, most people either sell or refinance their homes long before the 30 year repayment term is up. But it’s nice to know that your interest rate will never change during that time, no matter how long you keep it.

Because the interest rate stays the same with this type of mortgage loan, monthly payments more or less stay the same as well. This gives you a greater degree of control over your monthly housing costs, which isn’t always possible when renting.

This is a key advantage of owning versus renting a home in California.

In 2017, rent prices have been trending upward in many cities across the state. So there is a degree of uncertainty for many residents, in terms of monthly housing costs. There’s always a chance that your rent will increase over time.

But that’s not the case when buying a home with a fixed mortgage loan. Home buyers who use this kind of loan to buy a house in California enjoy greater predictability and payment stability over the long term. There aren’t any unpleasant surprises.

There are other advantages to buying versus renting in California, and we will cover them in future installments of this series.

Where to Learn More

If you would like to learn more about this subject, check out our updated look at average mortgage payments in the state. It will give you a better understanding of current housing costs.