|Leveraging Your Money
Leveraging Your Money
Are you looking to buy a home? Then it’s time to talk about leveraging your money. An important part of buying a new home is understanding how to leverage your money. In basic terms, leverage allows you to purchase a large investment using a much smaller down payment combined with a lender’s financing plan. To give you a better idea, imagine the following scenario. You purchased a $225,000 home with 10 percent down, you leveraged your down payment of $22,500 to invest in an asset worth 10 times that amount!
Furthermore, using your tax-free BAH in conjunction with the benefits of a VA Zero Down program to acquire a home, creates stronger leveraging power. And as a reminder, at tax time you can deduct the interest you've paid on your mortgage (with your tax-free BAH). Just don't try that with Rent!
Appreciation Of Your Home
When you begin to consider appreciation, or the increasing value of your property, the benefits of leverage become very clear. Look again at our scenario above. Imagine that you have lived in that home for 3 years and in those years, the values of properties in your area increased at an average of 4 percent each year. The home that you originally purchased at $225,000 would now be worth over $250,000. Even though you only put 10 percent down when you purchased your home, you still have the opportunity to enjoy the full appreciation amount. As a sidenote, you will also benefit from appreciation if you used the zero down program.
Making An Investment For Your Future
In addition to your down payment, you must make monthly mortgage payments. With these payments, you begin to build equity. This means that a portion of your mortgage payment will be used toward paying of the principle balance that you owe. Have you ever wondered why buying a home is such a wonderful investment? It’s a great investment opportunity because you may have the chance to not only make a profit, but to also pay yourself back for the money you have put in to your home over the years.