What Exactly Is Home Equity? He Precious?
Rental prices are showing no signs of coming down, but home prices aren’t coming down either! In the last year, home prices have increased by 13.2%, which bodes well for home owners’ equity. As long as property values are high, any amount of money you invest in the maintenance or improvement of your home will pay off in the future. More Value, More Equity!
As we’ll discuss shortly, there are many homeowner expenses that don’t build equity. Still, it’s a better arrangement than the rental game, in which tenants aren’t creating any equity from monthly rent payments.
What about down payment?
Some sources will tell you not to buy the home if you can’t come up with a 20% down payment offer. Such an old fashioned approach seems to overlook the fact that some home buyers are making purchases with zero dollar down payments. This is only possible if you qualify for certain loan programs and government assistance programs.
Admittedly, a zero dollar upfront payment is not the best scenario. For one thing, you’ll have a much higher interest rate to contend with. Plus, there are still big fees associated with buying a home, such as closing costs. Nevertheless, this proves that the 20% down payment guideline is bogus at a time when most home owners are comfortable putting down 6%.
shutterstock: monkey business imagesUnexpected Cost?
There’s no doubt that landlords have to deal with more unexpected costs than renters. When an appliance breaks down or the roof leaks, tenants can call their landlords and request repairs. Homeowners have to pay out of pocket for these services, the cost of which can skyrocket depending on the age of the home.
And this is just the beginning. In addition to mortgage payments, home buyers also need to take into account property taxes, home insurance and utilities. The size of your home will often determine how expensive these utility bills can be.
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