Mark Novak

RE/MAX ELITE REALTY
1 Bel Air South Parkway
Bel Air, MD 21015
Phone: (410) 515-0100
Stop Renting and Start Building Wealth... build wealth through owning a home

I am glad that you are still with me, we are about to take a look at how homeownership can help you to build personal wealth.

 

As an example, let's look again at the $200,000 home. Unlike your rental unit, your home should appreciate over time. However, we live in uncertain times and most of the uncharacteristic appreciation of 15%-25% that we experienced a few years ago has been erased. Properties have readjusted and most experts agree that this year should indicate the bottom of our real estate slump, so Instead of assuming average growth, we assume that prices are flat in the first year of ownership and pick up, but only slightly, in the second year. In the third year of ownership, your home has appreciated a modest $210,858. After ten years assuming a return to an average 4.5% appreciation Build wealth through homeownershiprate*, your $200,000 home will be worth around $286,948. Not only do you earn a rate of return on your original purchase price, you also get a return on any subsequent appreciation.

 

*Average price appreciation from 1970 - 2008 was 6.0%

 

 

“Appreciating” Returns

Year

Price Growth

Home Value

1

0.0%

$200,000

2

0.6%

$201,000

3

4.8%

$210,858

4

4.5%

$220,346

5

4.5%

$230,262

6

4.5%

$240,624

7

4.5%

$251,452

8

4.5%

$262,767

9

4.5%

$274,591

10

4.5%

$286,948

Total Appreciation After Ten Years

$86,948

 

 

 

 

 

 

 

 

 

 

 

 

Click here to contact me anytime you have a question or need an explanation.

 

Home Ownership Builds Wealth for Households

The Federal Reserve Board estimates that homeowners' net worth has ranged between 31 and 46 times more than that of renters in the years 1998 to 2007. In 2007, the median net worth for homeowners was $234,200 compared to $5,100 for renters. Even though the difference will surely narrow as a result of house priceStop Renting and Start Living declines since 2007, median homeowners will likely still have substantially greater net worth than median renters.

How do you build up your net worth?

As a homeowner, you build wealth in two ways: through paying down the principle on your mortgage and through those "appreciating returns" on your home.

We've already seen how your $200,000 home could be worth $286,948 in ten years. In addition, you are paying down the principle on your mortgage. Remember that $200,000 you borrowed at 5.5% over 30 years - that debt amount is decreasing every month and every year as you make payments.

 

 

Year

Home Price

Mortgage Debt

Net Worth

1

$200,000

$187,441

$12,559

2

$201,200

$187,737

$16,463

3

$210,858

$187,880

$28,977

4

$220,346

$187,863

$41,483

5

$230,262

$187,675

$54,587

6

$240,624

$187,308

$68,316

7

$251,452

$187,750

$82,701

8

$262,767

$187,992

$97,775

9

$274,591

$187,022

$113,570

10

$286,948

$187,828

$130,120

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Click here to contact me anytime you have a question or need an explanation.

After the first year, you only owe $187,441 on a home that is worth $200,000. As home price growth returns to a normal level the amount of wealth that you net from appreciation will also increase. At the same time you pay your mortgage reducing your outstanding debt. As your debt decreases and your home value increases, you accumulate wealth from the value of your home. In addition, over this ten-year period, you will have significantly lower after-tax payment for housing. Each year as your home appreciates and you continue to pay down your mortgage debt, you increase your own net worth.

 

 

Why Not Wait?

Why not wait? When will Rates Go Back UPYou may wonder whether it is worthwhile to wait to purchase your home to purchase your home until prices are at their lowest. Prices are not the only factor that should drive your decision. Currently, interest rates are at generational lows that greatly improve the affordability of homes. Further, I previously demonstrated that even if home prices decline, the possible tax savings of owning a home lead to lower cost for the buyer, not the renter. Also, there are huge, additional tax benefits for those who have not owned a home in the last three years, and these benefits will be expiring soon. Not to mention the numerous "free money" grants that are available for down payment and closing cost assistance. Finally, and most importantly, when you have made the decision to commit to homeownership and securing your future because you are financially ready, market conditions are a secondary concern. In fact, my member association the National Association Of Realtors® 2008 Profile of Home Buyers and Sellers found that more than four in ten buyers purchased a home because the buyer was ready to make the commitment to home ownership.

 

 

Homeownership-It's NOT Just About the Money

The "numbers tell all the story" examples that I have showed you should ease your mind about the financial aspects of becoming a homeowner. But there are other, less monetary, benefits to homeownership that my partially explain the fact that buyers buy when they are ready. Several research studies indicate that homeownership adds to the value of communities, has  a positive effects on children, and even contributes to increased voter participation rates.

Buying your first home? Mark Novak specializes

 

Homeownership: The American Dream

More than two thirds of American households own their own home. They know the benefits of homeownership, from the accumulation of home equity, tax incentives, and the pride of owning a place of their own. They also had to take that first step of deciding "I'm ready to be a homeowner" Mark Novak has assisted countless people just like you in their decision to buy and with their first home purchase. He can guide you through the entire process, from applying for the right mortgage and discovering which grants are available to closing on your home and beyond. You are not alone in this process. Many of Mark's past clients have already come backMark Novak can guide you through the entire process of buying your first home. to him for assistance again and they all enjoy referring him to friends and family. Mark and his team are available to offer any assistance you may need and to answer any questions you may have.  To contact Mark Novak just fill out the form below and he will contact you by phone or email, just indicate what you prefer.

Buying a home call Mark Novak

 

 

 

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