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Free Reports
Secrets That Reveal How Buying MORE Can Cost
Less!
When looking for real estate, buyers often discover that no
matter what price range they explore, the house they REALLY want to buy, the
house containing EVERYTHING on their current ‘wish list’, is always just out of
their reach. Amazingly, this phenomena occurs whether the couple is settling for
a $150,000 home, while yearning for a $200,000 property; or inspecting a
$500,000 house, while longing for a $600,000 residence.
With interest
rates low and housing prices on the rise, justifying that ‘stretch’ to get your
dream house may be easier than you think. In the long run, after factoring in
appreciation and tax benefits, you might just end up putting out LESS money for
MORE house.
Here are some reasons to contemplate increasing the
price range of your home search:
Advantage #1…
O.P.M.
The leverage you gain using Other People’s Money is one of the
nicest parts of buying a home. With interest rates attractively low, you may
find you have the ability to qualify for a higher mortgage amount than you
originally thought. A small down payment, (usually no more than 10 - 20 % of the
purchase price), is all the cash you may need to contribute to the purchase
price. Even so, as the property increases in value, you reap the benefits of the
total asset. Therefore, if you buy a house for $150,000, with $15,000 down, and
that home appreciates 10% a year for the next two years, you will have amassed
$30,000 in additional equity. That’s a 200% return on your original investment.
If you stretch a bit, and buy the $200,000 home, your gain would be $40,000 in
two years.
Advantage #2… More Tax Benefits
The interest you
pay on your mortgage is tax deductible. So, the more you borrow, the greater
your tax shelter. Think of it, at the same time your larger house is making you
more money through appreciation, the government is also allowing you a bigger
tax allowance. It doesn’t get much better than that!
Advantage # 3…
More Stability
If you are like most people, you HATE to move. Besides all
the packing and unpacking, there are the other costs -- financial, physical, and
emotional -- associated with relocating. The ‘closing costs’ alone involved with
selling and re-buying a home can account for thousands of dollars (real estate
commissions, transfer tax, and various ‘certificates’ on the seller side:
points, title costs, etc. on the buyer’s side). Add to this the time and stress
involved with settling in at a new location, and you have powerful reasons for
trying to stay put as long as possible. Buying that bigger (more expensive) home
may allow you to do just that.
Advantage # 4… Getting What You Really
Want
The most compelling argument for stretching your purchasing power
might well be the joy you will feel each time you come home to the house you
REALLY wanted!
Since few things in life are
simply black or white, here is the flip side: Reasons you may NOT want to
stretch your price range:
Disadvantage #1… What Goes
Up…
While housing prices may continue to rise, they may also fall. Past
history has shown that the law of gravity certainly applies to the housing
market. Interest rates, regional economies, even weather conditions can
drastically alter the value of a home. At the very least, you need to look at
the possibility of that $600,000 dream house being worth $500,000 … or less, and
ask yourself the question, "What if this happens, and I have to
sell?"
Disadvantage #2... Job Security?
Gone are the days when
the average person can count on working for a company for 25 years, retiring
with the pension and a gold watch. Taking on a larger mortgage probably means
you have to continuously produce income at the same level (or higher) for many
years to come. You need to ask yourself the following question: "How secure is
my job?". Look at the company, the industry, and the region. While no one can
predict the future, don’t let the possibility of downsizing, or out-souring, or
consolidation catch you completely by surprise. In addition, ask yourself, "Do I
like what I am doing?" The ability to just pick up and pursue a new career might
be severely limited by the financial pressures of a larger mortgage.
Disadvantage #3… And Baby Makes Three…
Many young couples
purchase a home as the first step to starting a family. Stretching the limits of
your qualifying range often means that both the husband’s and wife’s salaries
are needed to meet the demands of an increased payment. This is true not only at
the time of the purchase, but for years to come. You need to ask yourself the
question; "Do future plans include both partners continuing to work after the
child/children are born?"
So, there you have it. Whether you choose to go
for the larger house, or opt for a more conservative purchase will depend upon
your personal make-up. Specifically, your ability to tolerate risk. As always,
seeking the advice of a financial advisor before making any real estate purchase
is a wise move.
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