Not many Realtors will tell you this. Here are a few tips that likely set you apart when it comes to real estate games.
If you bought a home about 10 years ago, holding real estate for another 10 to 15 years could really benefit your financial wealth (not financial advice). Here are the three reasons why:
- Home Appreciation
- Debt Reduction
- Beating the Inflation
Home appreciation:
We haven’t had a decade when homeowners lost home values within that decade. Assuming they bought at reasonable prices and medium price range homes, not luxury homes. Even if they bought at the peak of the 2007 market right before the big crash, by 2018 (10 years after), the home prices did better than recovering and almost doubled in many of the markets. So, focus on 10 year appreciation, not every year data or corporate media fear news.
Debt Reduction
The lenders make the most money in the first seven years of any home purchase transactions. It’s because most of the monthly mortgage payments go toward the interest payment. After seven years, more of the payment will go toward the principal. This may be the reason why the real estate industries encourage people to buy and sell often.
As a homeowner doing less selling and holding on to real estate long-term will be more beneficial, especially after the first 7 years of mortgage payments made. In the United States, real estate is probably the most stable and easiest way to build wealth in the long-term if you buy it well and hold it long-term.
Here are Two Ways to reduce the mortgage length:
- Bi-monthly payments shorten the loan length by an average of 5 years.
- Pay extra toward the principal payment. Depending on the amount, it shortens the loan length as well.
Beating Inflation
Having a mortgage with a lower rate than current inflation rate means, your borrowed money at much cheaper interest rate than what is not available currently. So your mortgage is outperforming by saving you more money than other investments or holding cash. In theory, the more you borrow at lower cost, the more you can deploy the savings toward your next investment opportunities.
Last thing to remember is that when you sell your long-term held real estate, you might have to pay capital gain tax depending on how much equity you gained. It’s a better problem to have than not having that equity because you sold it too soon.
