Is Making Realty A Reality Worth It?
by: Sean Carrott
Whether you call it realty or real estate, owning a piece of property that belongs exclusively to you gives you and your family a confident peace of mind. "Home Sweet Home" is the American dream. A place to hang your coat, kick up your feet and invite your friends over in the comfort of a place you can call your own.
Realty sometimes takes a lot of sacrifice that doesn't happen overnight for many people. The struggle to save up thousands of dollars to put down on a home can take a very long time. While a person tosses around the pros and cons of renting versus buying, they may well be throwing away money rather than building an investment. Realistically, purchasing property is really an expense and not an investment until you end up selling the property for a profit. As long as you are taking money from your pocket and putting it into someone else's, you create a debit on your finances.
A good way to clarify the benefits of owning a home is for you talk to someone such as a Realtor, a licensed real estate professional, about your choices. A Realtor will help you plan to build the funds to make home ownership a reality. Sometimes, a Realtor will advise that you get your ducks in order first, meaning work on paying off other debts that count against your chances of qualifying for a home loan. Some loans require less down payment and some loans carry steeper conditions depending on your credit score. You can find out your credit rating online through the three main credit bureaus such as Experian, Equifax and TransUnion.
If your credit score is in the healthy range, you should next think about how much of a mortgage is affordable based on your monthly income. If your current rent exceeds a monthly mortgage payment by a lot and you can afford a down payment, sometimes switching to a home mortgage payment is very wise. Not only might you save on monthly expenses for a place to live, but also, over time, you may build equity.
Equity is a technical term to describe what you own. More specifically is the amount of an asset owned by you and not still in hock to the lending institution. Let's look at an over-simplified example: Your house cost = $150,000, but you paid $10,000 up front. So you are borrowing $140,000. Each month you pay $1000, which equals $12,000 each year. So in this example your equity would be $10,000 + $12,000 = $22,000 dollars by the end of year one. The main thing missing in this calculation is the interest you pay to the bank which means you will own nothing like so much at the end of year one. But you get the picture. It also ignores the rise in property values which will work in your favor. The key message is that when you have a repayment mortgage you are consistently building up your equity levels.
Realty owning has some downsides as well as upsides. You can visit http://www.realtywz.com for an easy way to explore all aspects of realty and related topics. You'll get direct access to resources of the big real estate agencies like Century 21 or Coldwell Banker, as well as tools for example, to help you calculate the cash differences between renting property and buying it.
About The Author:
Copyright 2006 Sean Carrott. All rights reserved.
Sean Carrott runs Realty WZ a popular resource for realtor related information. For further details visit his article archive: http://www.realtywz.com/articles/.
September 2006
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