EQUITY. For young buyer's, attainable if you work at it!

By
Real Estate Broker/Owner with Cathy Ashley McAlister, GRI CDPE - Broker / Sacramento

EQUITY.  For young buyer's, attainable if you work at it!

Many years ago, I bought my first home at age 20.   My grandfather offered me the same solid advice he provided his children.  It worked for him and still stands the test of time.  Starting with your very first payment, add a little extra.  In his time it was only cents and dollars.  He followed his own advice and paid off every single home early.  He kept many of them and was able to enjoy a long life, free from worry.

Simple formula really.   You have a $100,000.00 loan (realistic price in much of the nation today); add an extra $100.00 per month to apply to principal.  In the course of a year you have paid $1200 and over the course of 5 years have reduced the principal an additional $6,000.00.  This is above and beyond your normal scheduled reduction.  With that formula you will have reduced your principal balance almost $15,000.00 in five years.  If you keep this up for another 5 years your loan balance would be under $63,000.00.   You are now talking some serious principal reduction, equity retention and complete ownership in a very short time.    

This is what real estate was originally about.  Staking out a place to call home; to own the land and everything thereon.  A place to dig in and build your life.   But most importantly, having control of your equity gives you the power to make choices, the least of which should be the power to borrow.  Having free & clear properties gives NO lender the power affect and control your life.     

While this is not for everyone and our percentage of homeowners is dropping.  Homeownership will still be the life of choice for the majority of people.   For those, I welcome you to the ranks and Bravo for stepping on board.  

 

And to my grandfather, Emery Lorance.  Thank you.

 

 

Comments (4)

Elizabeth Weintraub Sacramento Realtor Top 1%
RE/MAX Gold - Sacramento, CA
Put 40 years of experience to work for you

Quite a dapper looking guy, your grandfather. Times have certainly changed. We went from scrimping and saving to spending like a drunken sailor and now we're back to scrimping and saving. If you can't afford to pay cash, don't buy it. Unless it's a house, and then pay it off as quickly as you can. Pretty simple rules to live by.

May 27, 2011 01:55 PM
Mary Douglas
United Country Ponderosa Realty, Red Feather Lakes, Colorado - Red Feather Lakes, CO
REALTOR, Red Feather Lakes, Colorado

Hi Cathy, our grandparents were smart like that!  Good advice for any homeowner- young or old.

May 28, 2011 02:35 AM
Karen Anne Stone
New Home Hunters of Fort Worth and Tarrant County - Fort Worth, TX
Fort Worth Real Estate

Cathy... it's funny how it works, but it really IS funny how the older we get, the smarter our parents, and in turn, our grand-parents were.  Paying ahead used to be something that so many folks did.  Unfortunately, that was during the time when people looked at their home as a HOME... and not something they could refinance every three or four years and pull the equity out of.

How great it would be to be able to be sitting in a home one owns free and clear.  It's an old habit that seems to have disappeared.

Oct 24, 2011 01:35 PM
Cathy McAlister
Cathy Ashley McAlister, GRI CDPE - Broker / Sacramento - Sacramento, CA
Sacramento DRE#00648507

Karen:  I agree and wonder if the one of the better by-products of this downturn will be a new generation of cost conscious home buyers/managers of personal credit.  

As a side note.    It's nice to be back.   Thank you for your kind words.  When I look back I notice that I tend to re-appear in the fall.  Not sure why.  Shorter days, more night or just more comtemplative in the fall. I am a Scorpio, maybe that has something to do with it.   But over the last three years... it is certainly a trend and you are someone I always look for.  Hope you are doing well. :-)

Oct 24, 2011 05:41 PM