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Mortgages are Leveraged Investments


Happy Thursday – Rates are up, and inventory is low, but the positive news is we are going to continue to see homes appreciate in our market. For this week’s video, I want to talk about the return on investment when using a mortgage to buy a home.


Let’s say you buy a $400k home and put 5% down. That is a $20k investment plus closing costs - which we will say is an estimated $10k. So, your initial investment is $30k. If you get 5% appreciation the first year, that means you make $20k on your $30k investment, so your rate of returns is 66%. For reference, if you put $20k in the stock market and received a 10% return that would be considered great, but you only get the return on the $20k not the whole $400k like you do with real estate.


Now let’s look at the cost to wait if you are renting. If you currently pay $2k in rent, and we use the same scenario of a $400k home that appreciates 5% next year, then the cost of waiting is $44k.


Let me be clear, I know due to affordability, not everyone can buy right now. But if you are still able to qualify for a home that fits within your budget, you will make a great rate of return on your home. There is a reason that Dale Carnegie said 90% of all millionaires became so through owning real estate.


Weekly Newsletter


Stewart Sadler

Managing Partner

Cornerstone Mortgage Group

Georgia Residential Mortgage Licensee: 21412 • Company NMLS: 147913 • Individual NMLS: 147938

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