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| Leveraging Your Money |
| One of
the greatest financial aspects of buying a home is the ability
to leverage your money. Simply put, leverage allows you to use
a small down payment and financing to purchase a larger investment.
For example, if you bought a $125,000 home with 10 percent down,
you leveraged the $12,500 down payment to purchase an asset
worth 10 times that amount! |
| Appreciation |
| The benefits
of leverage really become apparent with appreciation, or the
rise in value of a property. Using the above example, say you
were to live in the house for 5 years, and during that time
property values in your area were to rise an average of 2.5
percent a year. Your home would then be worth over $141,000.
By putting only 10 percent down, you get to enjoy the appreciation
for the full amount! |
| Paying yourself |
| In addition
to the 10 percent down, you'll also have to make mortgage payments.
But with each payment, a certain amount of money is being used
to pay down the principal balance that you owe. This is called
building equity. So in the event you sell your house, not only
can you realize a profit from your leveraged money, you also
have a chance to pay yourself back for the money you've put
in over the years. No wonder so many people consider a home
an excellent investment! |
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