Money You Saved for a Down Payment

Occasionally, buyers who can qualify to purchase a home decide to “take a break” and wait to purchase a home. When the focus of buying a home is relaxed, other uses for the money that was going to be used for the home are considered.

Maybe they think how much fun it would be to have a Sea Doo or a motorcycle or a new car. It is amazing how many people would like to buy a home but either don’t have the down payment, the income or the good credit to make it possible.

Instead of spending the money, consider investing the money for two years until the time is right to buy a home. Let’s look at putting the money in a certificate of deposit that earns 2% or in the stock market that could average a 5% return.

Assume you were purchasing a $295,000 home on a FHA loan with 3.5% down payment. The $10,325 would grow to $10,742 in the CD which isn’t a big increase but at least it is safe and secure, and it will be available when you’re ready.

If the same amount were invested in a safe stock or mutual fund that earned 5%, it would grow to $11,383 in the same two-year period. It earns more but there is more risk involved.

Your Best Investment
CD	Stock Market	Home
Cash to Invest	$10,325	$10,325	$10,325
Wealth Position	$10,742	$11,383	$38,871
Profit Taxed as	Ordinary Income	Long-term capital gains	§121 exclusion applies

Alternatively, if you invest the same amount in purchasing a home that appreciates at 3% a year, the equity would be $38,871 two years from now. The dramatic increase is due to leverage, being able to control a large asset with a small amount of cash. The appreciation is based on the purchase price not the down payment.

Another factor is that there is principal reduction with each payment that is made.

Make your own projections with Your Best Investment.

About Jamie Maze Real Estate Group

The Jamie Maze Real Estate Group specializes in buyers and sellers in the Columbus area since 1992, residential homes and condos, relocation, new builds, first time buyers, distressed properties and short sales, and they are a multi-million dollar producing team helping hundreds of clients. Their service area encompasses a large majority of the Central Ohio area. It is their mission to make the real estate process as smooth as possible for all of their clients. They are full-time, professional Realtors with tons of energy and love to exceed their clients expectations. Their business is predominantly repeat and referral business, which is why it is so important to deliver excellent service. They want to give the same fantastic service to their clients' family & friends. There is no greater honor. They are the Jamie Maze Real Estate Group...guiding you through the MAZE of real estate.

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