Dallas
- Home Appreciation |
Home Appreciation
- As a general rule, homes appreciate about four or five percent a
year. Some years of course will be more and some less. The figure
will vary from neighborhood to neighborhood, and from city to city.
Five percent doesnt really seem like that much at first. You could
earn the same return with a very safe investment in treasury bills
or bonds.
But take a second look…
If you bought a home that costs around $200,000 and put down 20% that
would mean your initial investment would be $40,000.
At an appreciation rate of 5% annually, a $200,000 home would increase
in value $10,000 during the first year. That means you earned $10,000
with an investment of $40,000. Your annual "return on investment"
(ROI) would be a whopping twenty-five percent.
And because the interest on your mortgage and your property taxes
are both tax deductible, the government is essentially subsidizing
your home purchase.
Your rate of return when buying a home is higher than most any other
investment you could make.
Real estate appreciation refers to an increase in value of your
home and the property. When your property "appreciates" you have
greater equity against which to borrow, and you realize a greater
profit when you sell. the economy is the driving factor of real
estate appreciation in the U.S. That includes interest rates as
well as the current employment rate, business growth in the area,
housing supply and demand and affordability.
Some loan programs, such as the option ARM loan, have a "negative
amortization" feature. What this means is that you are paying an
amount on your mortgage that is less than the interest you owe for
the month. When this happens, the unpaid interest for the month
is added to your total loan amount.
This can be a dangerous thing for many people, because they can
actually lose equity on their home, even though their home is still
appreciating. When you sell your home, you can actually end up still
owing money on the loan.
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