The 'Equity Home' to Buy Your Next Home
Dear home buyer,
Let's start with a helpful definition:
What is an equity home?
At Nuhom, we define the 'equity home' as a home you buy which appreciates in value over time. This doesn't have to be your first home purchase, but it certainly can be. That appreciation in value is your equity and you can access it in three ways:
Sell your home
Do a cash-out refinance with a bank or lender
Utilize a home equity line of credit (HELOC) with a bank or lender. Many homeowners use this equity to purchase their next home
Home Equity = (Home Value) - (Mortgage Balance)
The two best ways to create equity or value is:
Buy your home and allow the market over time to appreciate
Invest in your home with needed or desired updates
With either approach, time is your friend, but only if you start early. We encourage home buyers to think early and start early.
We have watched many of our home buyers and friends buy their first home between the ages of 25-35. Today, they have benefited from the home appreciation over time. Here are a few of those examples:
Home Owner 1
City: Revere, MA
Type of home: Condominium
Year Purchased: 2015
2015:
Purchase Price: $290,000
Downpayment at time of purchase: 10% or $29,000 plus closing costs
Mortgage Balance: $261,000
Mortgage Payment: 3.8% fixed interest rate; a $1,216 monthly mortgage (principal & interest)
2020:
Current Estimated Value: $485,000
Current Mortgage Balance: $234,826 after making $72,969 in mortgage payments (principal & interest)
Over a 5-year horizon, less their original downpayment investment of $29,000, these 2015 home buyers have gained $221,174 in home equity.
This equity is in the home and can be utilized one of the three ways stated above.
Home Owner 2
City: Chelsea, MA
Type of home: Condominium
Year Purchased: 2015
2015:
Purchase Price: $345,000
Downpayment at time of purchase: 15% or $51,750 plus closing costs
Mortgage Balance: $293,250
Mortgage Payment: 3.9% fixed interest rate; a $1,383 monthly mortgage (principal & interest)
2020:
Current Estimated Value: $530,000
Current Mortgage Balance: $264,284 after making $82,990 in mortgage payments (principal & interest)
Over a 5-year horizon, less their original downpayment investment of $51,750, these 2015 home buyers have gained $213,966 in home equity.
This equity is in the home and can be utilized one of the three ways stated above.
Real estate is generally a longer term investment especially when it comes to the home you live in. The examples above are homes purchased in developing cities that were ripe for growth. According to Zillow, home values have gone up 4.5% in Revere and 2.9% in Chelsea just over the past year. In both cases, the homes have appreciated quite significantly with a growth rate of 67% and 53% respectively from the original purchase price.
You can do it too
Buying a home is often looked at as a daunting process. It doesn't need to be. We have made the process simple, from helping you understand what you can afford to buying the home you love with ease.
Here are some tools to get you started:
We believe homeownership is a great investment if thoughtfully executed. If you are thinking about buying your first home or next home, connect with us to get started.
Nuhom is a Boston based full-service real estate tech company making home buying convenient, fast, and rewarding. We have dismantled the traditional home buying process and replaced it with innovative technology, far fewer hurdles, and more savings for the modern home buyer. Learn more at www.nuhom.co