Selling Your Home

Selling Your Home – Leveraging Your Money

Owning a home can be quite an excellent investment!  It’s no wonder that so many people take advantage of a buyer’s market.  Here are three factors that play into the reasons why owning can be a smart idea.

Leverage is using a small down payment to purchase a larger investment.  For instance, you might purchase a $125,000 home with a 10% down payment.  In doing this, you would have leveraged a $12,500 down payment for an asset worth ten times as much.  This advantage allows an individual to purchase a home that might otherwise be out of his reach financially.

Appreciation is the rise in value of a property.  If the $125,000 home in the example above were to appreciate at an average of 2.5% per year in a five year period of time, it would become worth $141,000 at the end of those five years.  If you leveraged only 10% down, you would be able to enjoy the appreciation for the full amount!

Equity is the total amount of money from each monthly payment that is applied to the balance on the principal of your loan. Paying on your loan each month builds equity.  When you sell your home, you accrue a profit not only from your leveraged money and any appreciation on the value of your property, but from all the equity you have built up as well.