Wealth Building - An Advantage Of Home Ownership
By Raynor James, Fri Dec 9th
As you grow older, the issue of wealth building comes front andcenter. Wealth building simply refers to increasing the netvalue of your total assets. Wealth building over time is one ofthe advantages of home ownership.
Building Equity
Owning a home can help you build wealth in two ways. First, youbuild equity by paying down your mortgage. A certain percentageof each mortgage payment goes towards a reduction in the totalamount
owed. Typically, payments in the first few years of themortgage are primarily applied to interest on the loans. As timepasses, however, more and more of each payment is applied to theoutstanding loan amount. Before you know it, the $300,000 loanis down to $50,000 and you've gained $250,000 in wealth.
Appreciation is the second wealth building advantage to homeownership. Each year, the value of your home will increase ordecrease slightly based on market prices. Over time, real estatehas always appreciated in value. In the current market, homes insome parts of the country are appreciating at rates as high asfifteen to twenty percent! Appreciation is a very popularsubject with homeowners.
Wealth Building Example
Let's look at a simple demonstration of how advantageous homeownership can be. Assume you buy a home in 2005 for $400,000and, for the purpose of simply mathematics, pay no down. Overthe next 10 years, your mortgage payments reduce the outstandingmortgage by $100,000 and the home increases in value to$600,000. The value of your home as a net asset has grown to$300,000 [$600,000 minus $300,000]! If you had rented duringthis period, you would have missed out on $300,000 in wealth.This simple example should show you the advantage of homeownership.
Historically, home ownership is one the best ways for familiesto build wealth. If you don't currently own a home, you shouldstart looking for one.
About the author:Raynor James is with http://www.fsboamerica.org - providing FSBOhomes For Sale By Owner. Visit our "sell my home" page athttp://www.fsboamerica.org/seller.cfm to list and sell your homefor free for one month. Visithttp://www.fsboamerica.org/buyer.cfm to see homes for sale byowner.
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