The lowest interest rates in The South Bay are now at 5% and often times near 4.5-4.75%. With much government backing, mortgage lenders are able to offer these low rates. Remember, they may not stay here forever so it is always wise if you are in the market to lock in the best fixed rate so you don't lose out on the tremendous savings these Historic rates provide. For example, if you borrowed a $350,000 mortgage at 7%, your monthly Principal/Interest payment would be $2328. If you qualified at today's 5.0% rate, your monthly Principal/Interest payment would be $1878- a savings of nearly $5,400 per Year! Use our Mortgage Calculator to determine your monthly housing costs.
It is normal for students to "rent" out 1, 2, or even 3 of the vacant bedrooms in a home. This rent is normally $600-800 per bedroom. So it is possible that two roommates contributing $650 per room will offset your total monthly mortgage payment by $1300. On a $300,000-350,000 mortgage, this "contribution" will possibly make 60 to 70% of the enitire monthly mortgage payment!!
There is no "National Housing Market" and although conditions in the rest of the country are difficult, The South Bay is a different story. The real estate market here is relatively healthy—meaning there is an adequate number of buyers and sellers keeping the balance of supply even. That said, as of mid January 2010, there were approximately 1,200 homes for sale in The South Bay. This means many of these home owners are Motivated and Ready to sell to You! It is a buyer's market which gives you some leverage when negotiating price. Use our Interactive Property Mapping Program to find the right South Bay home at the right price.
Mortgage Principle Reduction
Simply put, with every payment you make a portion of the payment goes toward interest expense and the other portion goes toward paying off the principal balance of the home. For example, a $350,000 mortgage amortized over 30 years will have total principal paid of $5,275 over 12 months at 5.25% interest. After 5 years of ownership, this will increase to Principal Paid just under $29,369. That is money you no longer owe the mortgage company when the home is Re-Sold. With the roommate contribution described above, much of this $29,369 is NOT paid by you or your student, but rather by the roommates who pay you! Not a bad deal!!
Using the same example above of a $350,000 mortgage amortized over 30 Years at 5.25%, you will pay Interest Expense for the first 12 months of $18,249.00 + Real Estate Taxes of approximately $4,375. You can claim this entire $22,624 expense on your tax return by deducting it and receiving a savings equal to your Tax Bracket Rate. So if your tax rate is 33%, you will have an estimated Tax Savings of over $7,465 just from this one home. Remember, you are not paying ALL of this! Your roommate contribution is assisting with much of this annual expense. Again, not a bad deal to have!