One school of thought is to buy the most expensive home you can. Because most homebuyers invest less than 20 percent down, you’re using the lender’s money to control a much larger amount than you’ve invested. The money guys call this leveraging your investment. As the home increases in value, the return on investment is a percentage of the home’s value, not a percentage of your low down payment. Also, with a 30-year mortgage, your monthly payment remains the same. But, as your income goes up, the mortgage payment takes smaller bites out of your paycheck.
Homebuyers who purchased their homes in the 1970s and 1980s saw the value soar and their incomes go up, but their monthly payments stayed the same. Those who stretched and bought bigger homes in the best areas benefited more because their homes appreciated the most. With the current federal tax rules, a husband and wife can sell their home and walk away with the first $500,000 tax free. Wynn and Barbara took advantage of this when they sold the home they bought in the mid-1970s for about $38,000. They chose a good area and kept the home updated. When they both retired, they sold their home for $249,000 and bought their dream motor home for half and banked the rest. It was all tax free, a gift from Uncle Sam for buying a home.
Proponents of this house buying approach also point out that by buying to the max now, you’ll save a future move. Since moving is disruptive, time consuming, and costly, you’ll save about $30,000 in selling, loan, and moving costs if you stay put longer.
Homebuyers who purchased their homes in the 1970s and 1980s saw the value soar and their incomes go up, but their monthly payments stayed the same. Those who stretched and bought bigger homes in the best areas benefited more because their homes appreciated the most. With the current federal tax rules, a husband and wife can sell their home and walk away with the first $500,000 tax free. Wynn and Barbara took advantage of this when they sold the home they bought in the mid-1970s for about $38,000. They chose a good area and kept the home updated. When they both retired, they sold their home for $249,000 and bought their dream motor home for half and banked the rest. It was all tax free, a gift from Uncle Sam for buying a home.
Proponents of this house buying approach also point out that by buying to the max now, you’ll save a future move. Since moving is disruptive, time consuming, and costly, you’ll save about $30,000 in selling, loan, and moving costs if you stay put longer.
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