Question: Even with low interest rates, I do not see where buying a home is such a good idea when I can rent one for far less than my payments would be on the house.
Answer: It is true that you can rent a home by having less of a cash outlay every month than you would have, normally, by owning. However, you must remember that as a homeowner, you can deduct taxes and interest from your income taxes, while building an equity for the future.
While it is true that during the last few years, as a result of low inflation, housing values have not increased a great deal, how can you be certain that we will not have another surge of inflation?
While economists differ on the amount of inflation that we will have over the next 10 years, I think that virtually all of them agree that it will be about 5% to 8%. This will add to the value of property, and should leave you with a tremendous asset within a matter of years.
Q: Shopping around for loans, what are the key questions I should ask?
A: First, you should shop three or four lenders, at least.
The questions to ask are how many points are charged for loan. A point is 1% of the total loan value.
Secondly, the interest rate and how long it will take to pay off the loan. You should also inquire if the lender levies a prepayment penalty if your loan is paid off before it is due.
Many persons who sell their homes, find out only too late that it will cost them several months interest in prepayment penalties. If you are thinking about an adjustable rate mortgage, you should compare the various caps or indexes to which the loan will be tied.
Fontaine is president of the Western Regional Master Builders Assn. and a director of the American Building Contractors Assn. He will answer questions concerning home improvements. Phone 213/653-4084 or write him at 6404 Wilshire Blvd., Suite 850, Los Angeles 90048-5510.