Many years ago when my wife and I purchased our first home we were so excited to have our own space where we could change the paint color, have a yard for our kids, and not be awakened by the guy in the apartment above us when he would decide to vacuum at 12:30 am.
Our first home was pretty small and within a few years our family had about outgrown our little place and we began to think of purchasing a larger home. One of the main tools we used was EQUITY.
Our home had gained value over the few years we were there and when we sold our home we had roughly $40,000 net profit from the sale which we used to put down on our new place. The difference between the value of your property and what you owe on the property is called EQUITY.
The $40,000 wasn’t from our savings, it wasn’t found at the end of a rainbow, but rather we used our EQUITY to move up to our next home.
Homes don’t always appreciate at a set rate but a normal rate of appreciation is 3%-4% and recently in the Denver area we have seen closer to 10% gains in home prices. Many people will stay in their homes for a long time and as the value of the home increases they can even take out EQUITY in their home or “cash out” some of their equity to pay off debt, make home improvements, or use for any other purpose.
There are many reasons folks look to purchase homes but a great benefit of being a homeowner is that historically homes increase in value and that helps build financial stability and wealth over time.