In the United States, one of the most common and popular ways to build personal wealth is by owning your own home. Whether it’s a condominium, townhome or single family home, money spent monthly on your mortgage acts just like money put away in a long term savings account.
This concept becomes all the more attractive when you add in another factor – the value of a home can appreciate much faster than money invested in a savings account with a low interest rate. In a situation where your home increases in value annually, your wealth or investment in the home increases two fold – 1) as you pay the mortgage, you owe less on your original loan amount; and 2) the overall value of your home or asset increases.
In overly simplified terms, if the $250,000 condominium you purchase this year increases in value to be worth $280,000 two years from now, you have increased your net wealth from your home investment in the following ways:
- Gained $30,000 in “free wealth” – the difference between the $250,000 price when you bought compared to the $280,000 it is worth now.
- Gained back the 24 months of mortgage payments just as if deposited the value of your monthly payment into a savings account.
If you are a renter and do not own the home, you have simply paid your rent every month to your landlord, and they have used your rent money to increase their own net wealth in the same ways.
Again, this calculation is overly simplified and does not take into account monthly property taxes, maintenance, insurance or mortgage interest. But as you can see, those who buy a home get their most expensive monthly costs – their cost of living – working towards building their personal wealth.
The DC real estate market is beginning to show signs of rebounding, with home prices starting to move upwards again. Mortgage rates are extremely low, meaning that the interest you pay on your loan will be minimized. Down payment amounts are also low, meaning you can purchase a home with as little as 3.5% of the purchase price required. For those who are gainfully employed with a stable income, there has never been a time to buy a home or invest in real estate.
Those purchasing now have the chance to ride the next wave of home appreciation and can significantly impact their personal wealth.
UrbanLand Company is a DC realty headquartered in the U Street Corridor – a hip and happening location. Their inventory of new DC condos and homes for sale in D.C. includes plenty of affordable options that are hip and stylish. You can contact one of their DC real estate agemts by visiting UrbanLandCompany.com.