One of the most common and popular ways to build personal wealth is by owning your own home. Whether it’s a downtown Austin condominium, townhome or a suburban single family home, the money you spend monthly paying your mortgage acts just like money put away in a long term savings account.
This idea becomes more clear 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 single family home 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 your 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.
These calculations are 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 – re-invested every month into building their personal wealth. Any of our Bubela agents are happy to discuss with you any of these details using one of our specific listings as an example or any home that is currently for sale in the Central Texas MLS.
The Austin and Central Texas real estate market is stable and there are plenty of housing choices for those wishing to buy this year. 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 or even $0 down when applicable programs apply. For those who are gainfully employed with a stable income, there has never been a better time to buy a home or invest in Austin real estate.