You are thinking about buying a home in Los Angeles but are wondering how your monthly payments would change compared with what you are paying now for a rental.
Of course your first step will be to talk to a lender who will give you a more accurate estimate and determine the amount of property you qualify for, but before you go that route here is a simple way to get an idea:
Let’s base our calculations on the purchase of a home at $750,000 and a mortgage interest rate around 4.5%.
It is expected that the minimum down payment you will need is 20% = $150,000. Anything less and your offer will probably not be taken seriously and you will be subject to Private Mortgage Insurance (PMI).
Your mortgage payment at 4.5% on a loan of $600,000 will be $2,250 a month.
Property taxes are approximately 1.25% of the purchase price = $781 a month.
Homeowners insurance will cost around $100 a month give or take.
So your total outlay per month for a $750,000 property would be around $3,131 per month.
Of course if you are buying a condominium you will be subject to monthly homeowners dues and if you are buying a home you will have to budget for deferred maintenance.
Also understand that these are your gross monthly payments. At the end of the year you will be receiving a tax deduction. How much of a deduction you should discuss with your tax advisor.
You will also have closing costs of around 1.5 to 2% to pay in closing cost = $11,00 to $15,000.
If you have the down payment, and the monthly payments are not that much higher than your present rent, buying a home may make sense, certainly when you consider you are building equity for yourself and not paying someone else’s mortgage.
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