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Techniques for Home Owners to Build Wealth
Possessing a home of your own is much more than just four walls
and a roof over your head. In fact, buying a home is one of the
smartest investments the average person can make. Average home prices
have been increasing by double digits each year for the past several
years, and it seems likely that this trend will continue. Also,
unlike a stock or a bond, you can actually live in this investment.
Purchasing a home can allow the home owner to build up wealth and
use the equity in their home to reduce their debt load and increase
their asset base. Several of the best ways to use a home to build
wealth are to:
• Assemble the largest deposit as you can up front. The home
owner can build instant equity by putting 20% down instead of only
10% or less. A larger deposit also means a smaller monthly mortgage
payment which consequently frees up more cash for other investments.
• Use the equity in your home to pay off high interest rate
debt. In fact, using the equity in a home to pay off credit card
bills and other high interest loans can be one of the smartest strategies
for building wealth and eliminating debt. Especially in today’s
low interest rate environment, there is no need to be paying 18%
interest on a credit card loan. The equity in your home can allow
the home owner to reduce this debt and start to build real wealth.
• Make extra payments on your mortgage. If you have any extra
cash available, you may want to consider making an extra mortgage
payment each month. The benefits of paying ahead on the mortgage
are that you not only shorten the length of the mortgage loan, but
you also avoid paying interest on that amount. Consult your amortization
schedule to see how much you are saving. By making an extra mortgage
payment each month, the home owner can turn a 25-year mortgage into
a 15-year one with no refinancing and no closing costs.
• Take full advantage of the tax benefits of home ownership.
The interest paid by home owners on their home mortgage loans is
tax deductible, thus be sure to take full advantage of this tax
deductibility to lower the real cost of the money and lower your
taxes.
Having your own home is one of the best investments you can make.
Not only does home ownership provide the emotional benefits of having
your own space, but also the financial benefits as it is a smart
investment and a great way to build wealth as well.
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