Wealth creation is the process of accumulating assets and increasing net worth over time. There are many ways to do this, but one of the most popular and reliable methods is by purchasing a home. Read on to learn the benefits of real estate investment, and how your new Empire home can help you build long-term wealth.
Amortization is the process of paying off a debt over time through a series of equal payments. In other words, it’s a way to gradually reduce the outstanding balance of a loan or other debt. Each time you make a house payment as a homeowner, a portion of that is allocated to your principal balance, lowering the balance due and increasing your equity. Combined with real estate appreciation long-term, this accelerates your net worth.
Amortization allows borrowers to pay off a debt gradually and systematically, making it easier to manage their finances and plan for the future, assisting with stability and overall wealth creation. In contrast to renting, only the landlord receives a long-term benefit. When owning and paying your own loan, your wealth and value of assets increases over time which becomes evident should you choose to sell your home in the future.
To gain a better understanding of leverage in regard to homeownership, our preferred lender, Stuart Saunders of BankSouth Mortgage, explains the concept below:
“If you purchase a home for $500,000 and make a down payment of 5%, you’ve invested $25,000. As your preferred lender, when you buy, you can borrow 95% of the purchase price. However, when you sell, all the profits are yours.”
Stuart further explains that at a rate of 5.7% appreciation each year, your $500,000 home would be worth about $780,000 in a decade. Your initial cash-out at purchase of $25,000 leveraged itself into approximately $280,000 of net-worth accumulation, yielding more than a 10x return by simply making your house payments. Purchasing a home enables this to be passively accomplished, which grows your initial investment exponentially and builds wealth long-term.
3. Taxes & Appreciation
As a homeowner, there are some items you can deduct on your taxes. Property taxes, mortgage insurance, and mortgage interest can offset what would otherwise be taxable income if you were a renter. By living in a home as a primary residence for two years, you are shielded from having to pay capital gains taxes when the home appreciates, saving you thousands of dollars long-term.
And while there have been fluctuations in the real estate market over the past four decades, residential real estate has appreciated in value over time — making it a sound investment at any point.
How We Can Help
Buying a home is one of life’s biggest milestones, and we understand the importance of finding a knowledgeable homebuilder you can trust. Our preferred lenders are familiar with the Empire sales team, our communities, and the company’s policies and procedures, so you can trust them to help you navigate through the homebuying process with consistent updates on your loan status. They also provide a great deal of expertise and access to special incentives and financing options that’ll make purchasing your next home easier.
Looking to learn more about the homebuying process with Empire? Check out our resources for new homebuyers and learn about the advantages of using one of our preferred lenders.
*Disclaimer: This post is solely for informational purposes and is not a substitute for professional advice. We encourage you to always work with a financial expert to discuss your best options and what is right for you.