Let’s talk about the three ways you can build wealth through home ownership.
First, let’s talk about equity. Let’s be honest, most people don’t have the discipline to throw a good chunk of money into savings every month. Think of your mortgage as a savings account. Every time you make a payment, the principal portion goes into that account. So if $500 of your payment is going towards your principal balance every month, that’s $500 in the bank. After a year, you have $6,000 in the bank. That’s equity, and it’s all yours.
Now, let’s talk about leveraging the appreciation you’ve earned in your home for your next home purchase. Typically, homes appreciate, or increase, in value each year. (Whereas a car depreciates in value the moment you drive it off the lot.) Let me give you a very general example. Let’s say that my home is worth $300k today, and it increases in value $10k by this time next year. Keep in mind, the rate of appreciation will vary each year based on the market. So, that $10k is money in my pocket. Now say I decide, five years down the road, that I’m ready to upgrade and sell my house. I have five years of appreciation in my home. I’ve been paying towards the principal balance. And when I sell, I make a good profit that I can then put towards my new home – potentially being able to put 20% down and avoiding Private Mortgage Insurance.
And, of course, there are some tax benefits to having a mortgage. If you itemize your taxes, you could deduct mortgage interest and property taxes, which can really help you out at tax time. Of course, always consult your accountant or tax advisor.
Not only does your home build wealth for you, but you could be building a legacy that will be passed on from generation to generation.
As always, if you have any questions, please don’t hesitate to reach out. Our Homespire Loan Officers are always here to answer any questions you may have and guide you through the mortgage process. Visit https://www.homespiremortgage.com/loan-officer-search/ to find a Homespire Loan Officer near you.