of the greatest financial aspects of buying a
home is the ability to leverage your money. Simply
put, leverage allows you to use a small down payment
and financing to purchase a larger investment.
For example, if you bought a $125,000 home with
10 percent down, you leveraged the $12,500 down
payment to purchase an asset worth 10 times that
The benefits of leverage really become apparent
with appreciation, or the rise in value of a property.
Using the above example, say you were to live
in the house for 5 years, and during that time
property values in your area were to rise an average
of 2.5 percent a year. Your home would then be
worth over $141,000. By putting only 10 percent
down, you get to enjoy the appreciation for the
In addition to the 10 percent down, you'll also
have to make mortgage payments. But with each
payment, a certain amount of money is being used
to pay down the principal balance that you owe.
This is called building equity. So in the event
you sell your house, not only can you realize
a profit from your leveraged money, you also have
a chance to pay yourself back for the money you've
put in over the years. No wonder so many people
consider a home an excellent investment!
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