So I buy my home for $190K three years ago putting $40K down and financing the rest with a 20-year fixed at 4.75%.
Compared to the asking prices on similar homes in my neighborhood I could now ask $240 for this house. People around me see this as a good thing.
If I’m not interested in selling anytime since I love the home and it’s where I want to live, Is there any reason I should be glad the value is going up?
Isn’t it more of a bad thing since my property taxes will now go up with the value of the home? And it’s not like I can upgrade to a better house since those homes have since jumped in value also.
If you need the money for anything, it’s there. Also, it’s more to leave whoever it is you’ll be leaving your estate to. Other than that, you’re lucky you love your place. That’s the most important thing.
First look at it in the reverse. How would you feel it the price had gone down $50,000?
It is hard to show how much it benefits you, since I don’t have any idea of how much of a down payment you made or what your monthly payments are. Consider how much you would be paying to rent a comparable space. Are your taxes and insurance payments greater or less than renting? How much could you have earned by investing the down payment money? Taking all that into account would you be farther ahead by renting? Oh and don’t forget the tax deduction you get from the IRS.
You may be happy where you are today, but will your wife be happy with it 15 years from now? Will you get transferred or need to hunt for a new job? Never say never. Someday you will be glad, because it is one of the best ways to offset inflation.
I bought a $190K house 7 years ago, now it could go for a little over $500K. It’s great that I could possibly make $300K selling my house, but not so great thinking that I couldn’t actually afford to buy my house at today’s price.
On the other hand, I’m exactly where I want to be. We’ll add on in a couple of years and still be paying way less than market value for the place. Only problem is that people are coming in to the area and ripping out the modest older homes and sticking 2 humongous McMansions on the lot in it’s place. Carpetbaggers!
Umm, actually he DID say what his downpayment was, and since he gave you the selling price, the downpayment, the interest rate, and the length of the mortgage, he effectively gave you his payments as well.
As mentioned above by McDeath_the_Mad you could use it for a home equity loan. But I think that the real reason is that people like to feel rich and feel like they made a good investment. It also gives them a sense of comfort to know that if they had an emergency, they could afford to sell and move.
The other nice thing about it is that it enables you to legitimately compete for you next house, even though that would normally be out of your league – since your current home has appreciated at a rate (presumably) similar to more expensive places in teh market, if you decide to move into one of them, you only need to come up with the difference, not the whole price of the new house. As long as your current house continues to appreciate, your next house will always be within reach, even though your peers who still rent will never be able to afford one.
One real advantage for me and Mrs. Lumpy was that after the market value of our home increased by 30%, we were able to get a very nice home improvement loan to remodel our kitchen and put in a garage.
I hate all of you. I bought a house three years ago for $129K; it appraised for $145K back then, and we added a new $5000 furnace last October. Now we have it priced at $135K, and we’ve had one non-serious lowball offer in four months.
I like to think I’m the one person who has bought a house in the last three years who is going to lose money on it.
Our house, and the others in our area, have gone up in price tremendously. While we have benefitted to a degree…we refinanced our mortgage and were able to take a lot of money out…I think the net effect, for us, was bad. It’s encouraged families with young children to buy in cheaper neighborhoods, and even encouraged some of our current neighbors to sell out and move where the houses are cheaper. We like where we are, and we still have enough friends here so that the neighborhood isn’t totally shot for us, so we’re not going to move. But unless prices come back down (and they’re not likely to), the neighborhood isn’t going to get much young blood.
We bought our house for $106,000 almost exactly 4 years ago. A year ago we refinanced and got an appraisal for $151,000. Sweet! Doesn’t do much for us now except let us plan for a better (earlier?) retirement using the extra money when we sell in 20 years. It’s a good retirement plan if you are OK with planning on having a relatively modest house and smaller amount of land when you retire - or moving up to the County for low cost housing!
It sounds good in theory but if all housing is going up in value at the same rate wouldn’t it just be better if neither went up in value at all so your assesed taxes weren’t as high?
That is to say, yes, your house went from $106K to $151K netting you $45K.
But at the same time the retirement condo / country house you have your eyes set on just jumped $45 in value also.
Ahhhh Grasshopper - what you say is true. UNLESS!! You plan on downsizing and moving to a location with a significantly lower cost in housing (Northern Maine). The incoming flood of people looking for cheaper housing and commuting to Boston/Portland has caused our house’s value to increase rather surprisingly (and others in the area to the same extent) - but if we are planning on running in front of the invading hoardes, there are very reasonably priced houses/land up country. Now…if this just holds true for another 15 - 20 years, we should be all set… If not, well then we’ll be working til we’re old and crusty…
Short-term, planning on staying put, no advantages, and the disadvantage of higher tax bill. Unless you have Private Mortgage Insurance, which a higher appraised value might help you get rid of (40K down on 190K house, I’m assuming no PMI is involved).
Remember, if you do take out that equity, you gotta pay it back somehow (or have less left over when you do sell). I hear of a lot of folks who don’t quite make that connection
Longer term, advantages are as others have mentioned. PLUS - if you ever go for one of those reverse mortgages, obviously a more valuable house would leave you with more tappable equity at that point.
Of course, but the point is that it exists in the first place. If the house hadn’t gone up in value, that equity wouldn’t be there to borrow and make use of either.
And on top of that, if you put it back into improving the house, you’ll increase the value further.
That probably depends a lot on the area. My house has also gone up in price tremendously since I bought it 17 years ago. But my neighbors have gotten much younger- when I moved in the neighbors were mostly retirees who bought in the '50s and '60s and my kids were the only ones on the block. Now, the neighbors are mostly under forty and the block is full of kids
This is a good point - generally, having richer neighbors means less crime in the neighborhood, and less eyesores like trucks up on cement blocks in the front yard. And having wealthier people who pay higher property tax, usually means better funded local schools, which is important if you have kids.
And, of course, you are missing the very important fact that you paid $190000 for something that is worth $240000. The other way to look at it is that you are paying 2002 housing prices in 2005 when housing prices have gone up and the value of a dollar has gone down.
