Buying Portland Real Estate...Will it Pay?

A frequent question from prospective homebuyers relates to building home equity. Portland real estate buyers like to estimate how much a home may increase in value based upon past appreciation. One of the many advantages of home ownership is that appreciation is based on the home's market value rather than on the actual dollar amount invested or the down payment so that a $100,000.00 home that appreciates 5% is now worth $105,000.00.
This is one way of building your Portland real estate home equity but there is more you can do.


TIME & MONEY

With a typical 30-year loan, most of your monthly payment goes toward interest payments with only small amounts going to the principle in the early years. Only half the principle is repaid in the first 23 years of the loan. You can build equity in your Portland real estate faster by choosing a 15-year loan instead of a 30-year loan. With a 15-year loan your interest rate should be lower and more is applied to the principle amount faster than with a 30-year loan. But what if you already have a 30-year loan, will you need to refinance in order to build home equity faster? Not necessarily!

ACCELERATED PAYMENTS

As a Portland real estate owner you have the right to pay more towards the principle loan amount each month. Let's say your monthly payment is $700.00 a month and $100.00 a month is being applied to the principle. If you choose to pay $900.00 instead of $700.00, the $200.00 overage will be applied entirely to the principle. Thus, instead of gaining $1,200.00 a year in home equity, you gain $3,600.00.

PRE-PAY OR INVEST?

The only factor being considered here is Home Equity. In individual cases it may be wiser to invest than to pre-pay your Portland real estate home loan. It also may be wiser to pay off high-interest, non-deductible loans before considering your home equity building options. Your financial advisor is the one to consult for these matters. If you would like up-to-the-minute information about home appreciation values in your area, please call or E-mail me today.