Appreciation

The term Appreciation as applied to homes and mortgages refers to an increase in the value of a property.

Let’s look at some numbers to put this in perspective and show you why appreciation makes real estate such a good investment. Take a 200K home bought for full value with an appreciation rate of just 5% per year. Year 1 – 200,000Year 2 – 210,000Year 3 – 220,500Year 4 – 231,525Year 5 – 243,101Now is it starting to sink in why appreciation is a key factor in Real Estate?

You may realize appreciation on a property due to a positive improvement in the property, the area, or the removal of another negative factor.

Appreciation is the increase in value of your home. This is one of the many benefits of home ownership. Many homes have seen double digit appreciation in the last several years.

Commonly, and incorrectly, used to describe an increase in value due to inflation.

One major misconception that many homeowners/consumers have is that appreciation represents some type of monetary performance of the equity in their home. Appreciation takes place whether a homeowner has 0 equity or $200,000 in equity. The appreciation is obtained from increased market value of the property. The equity, when trapped in the home is “lazy” – meaning it is not a performing asset.

Many of the savviest real estate investors know that the key to building their fortunes by using the equity in their homes as the foundation is to separate the equity from the home at a good valuation, and use this substantial liquidity, which is often borrowed at a fraction of the market rate of return in alternative asset classes, to invest in equities, commercial real estate, and most profitably in their own small businesses, yielding a substantially higher return than the nominal interest rate on the money they’ve cashed out of the home. This is a trick copied from big business and can be the cornerstone of a powerful wealth building strategy for homeowners who aspire to financial freedom.

The rate of appreciation differs depending on the area some areas appreciate faster than others but given time your home will go up in value.

If you feel that your home has appreciated a good amount, you should consider refinancing your current mortgage to get money out, or to get more favorable mortgage terms.

Other sites: Broker Outpost | VA | New Credit Card Minimum Payments | How To Choose A Real Estate Agent | Delinquency | Cash-Out Refinance | AZ Mortgage Source| Pay Option Arm Calculator

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