A Home Purchase As A Savings Vehicle
For most families the largest financial investment they will make is their home. A home is a large monetary investment and should be viewed as a savings investment as well. Homes are thought of as a “fixed asset”, increasing in value over time at a steady rate. This is not always true. A home can change in value over time, like the up and down cycles of the stock market. The severity of the cycle can determine whether large returns or losses result depending upon if the home is sold.
Similar to a savings account, the best way for a home to be a positive savings vehicle is to not “withdraw” from it. Refinancing the mortgage for a better rate or a shorter term has a beneficial effect on the equity in the home. Refinancing the mortgage for obtaining cash for other than home improvement purposes will have the same negative effect as withdrawing principal from a savings account. Making “deposits” such as home improvements or paying down existing debt on the home will in the long run increase the home’s value and lessen the effects of a “down” real estate cycle and increase the returns in an “up” cycle.