Sunday, September 16, 2012

Equity is Key

Just a short but important note for the kids.

If you rent an apartment, you give away about $800 each month. That's $9,600 every year. Over the course of ten years, that's $96,000.

If you put that money toward mortgage payments, you get to keep this money in the form of equity.

So, if you have $96,000 in equity, and you want to purchase a larger home, you have almost $100,000 to apply toward the new home. But, if you have rented for the last ten years, you are back to square one.

You have to live somewhere. Your Dad has rented (for various reasons) for 25 years. That means that I have lost almost a quarter of a million dollars in equity. When it comes time to retire, if I had the equity, I could sell the home and travel, pay for doctor's bills, etc. Or, just retire on a beach somewhere.

But I don't have any equity.

Some folks lost a lot of the equity in their homes when the housing market crashed in 2008-2009. But, none of them dropped back to square one. Owning is always better than renting.

My advise to you: Buy a house as soon as you can.

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