Is your home your greatest investment? For some people it is while for others it is more accurately summed up as their most costly investment. In some cases, people purchase more home than they can realistically afford, and they spend decades working hard just to pay the interest. Some people don’t even live long enough to pay off their homes, especially if the spend beyond their means in other areas as well.
A home should be a shelter and a sanctuary, but it can also be a good investment. Purchasing a home that is in good condition at below the appraised value can be very beneficial, since you will quickly gain equity. Equity is the difference between how much you owe on your home and the fair market value.
However, there are other issues to keep in mind. Even if you get a fantastic deal, you could end up paying way too much for your home over the long term. High interest rates can lead to you paying as much as three times the sales price for your home (or more!) by the time you pay it off. This is especially true if you have an extended mortgage. Some people happily sign up for a 40 year mortgage, giving little if any thought to what that means in the long run.
While many people choose an extended mortgage in order to keep their monthly payments down, they end up losing a huge amount of money over time. Purchasing a home that you can afford and one that you can pay off in 20 years or less, is by far a better investment (paying it off in 10 years is even better).
Sometimes, when people are just starting out they don’t really understand the nuances of such things. After awhile, they realize that they won’t ever be able to make a return on that investment. Even if the value of your home goes up a great deal before the time comes when or if you decide to sell it, you won’t really have made any money if you have paid a fortune in interest.
If you are in this situation, discuss your options with a financial professional. You may be able to refinance your home and save tens or even hundreds of thousands of dollars by the time you fully own your home.