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| Property Merchant, Princess Alake Oshun with a Royal father & his son |
We all need
somewhere to live. We therefore have the choice as to whether to rent the roof
over our heads, or buy it. Most of us can’t afford to buy outright (I doubt
you’d be reading this book if you were in this category), so in order to buy we
need to borrow a lump sum of money to buy with. But hang on. Haven’t we said
that borrowing is bad, bad, bad and we shouldn’t do it? Haven’t we said that
this way madness lies because you pay so much interest on what you borrow and
so on? Indeed we have.
somewhere to live. We therefore have the choice as to whether to rent the roof
over our heads, or buy it. Most of us can’t afford to buy outright (I doubt
you’d be reading this book if you were in this category), so in order to buy we
need to borrow a lump sum of money to buy with. But hang on. Haven’t we said
that borrowing is bad, bad, bad and we shouldn’t do it? Haven’t we said that
this way madness lies because you pay so much interest on what you borrow and
so on? Indeed we have.
So how can you
own and not borrow, buy and not have a mortgage?
own and not borrow, buy and not have a mortgage?
The answer is
that a mortgage can actually be viewed as an investment rather than a
borrowing. If you buy a property with a mortgage, you make a monthly
investment. The fact you pay that to a mortgage company we can gloss over. You
see, in the longer term (and if you’re lucky, the shorter term too) you can
reasonably expect that the interest you pay on your mortgage will be less than
the increase in the value of your property. What you are banking on is that the
value of your home will, in the longer term; go up and therefore you have
invested whatever deposit you put down, and your mortgage money.
that a mortgage can actually be viewed as an investment rather than a
borrowing. If you buy a property with a mortgage, you make a monthly
investment. The fact you pay that to a mortgage company we can gloss over. You
see, in the longer term (and if you’re lucky, the shorter term too) you can
reasonably expect that the interest you pay on your mortgage will be less than
the increase in the value of your property. What you are banking on is that the
value of your home will, in the longer term; go up and therefore you have
invested whatever deposit you put down, and your mortgage money.
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“There are those who believe that buying your home
instead of renting brings with it huge stresses, and means you have less fun.
It’s actually not the ownership that causes stress; its how much you borrow to
do it and what that means for your overall financial picture”.
Renting on the
other hand is not an investment. You will never see that money again. Of that
there is no doubt.
other hand is not an investment. You will never see that money again. Of that
there is no doubt.
With a mortgage,
you stand a good chance in the long term of seeing your mortgage payments lead
to an increase in the value of your house. When you sell, you get that increase
in value.
you stand a good chance in the long term of seeing your mortgage payments lead
to an increase in the value of your house. When you sell, you get that increase
in value.
There are those
who believe that buying your home instead of renting brings with it huge
stresses, and means you have less fun. It’s actually not the ownership that
causes stress; it’s how much you borrow to do it and what that means for your
overall financial picture. The lesson is to think carefully about how much your
mortgage repayments will be and that you are able and willing to pay them.
who believe that buying your home instead of renting brings with it huge
stresses, and means you have less fun. It’s actually not the ownership that
causes stress; it’s how much you borrow to do it and what that means for your
overall financial picture. The lesson is to think carefully about how much your
mortgage repayments will be and that you are able and willing to pay them.
Of course if you
buy, there are no guarantees your home will increase in value – there will be
house price slumps – but over time chances are that they recover and go on to
increase again. Ideally buy cheap and sell for a lot more. You then have a
choice: invest the profits in the next property without borrowing any more and
in doing so you decrease the mortgage each time. Eventually you own outright
and without mortgage payments you have somewhere to live and don’t have to pay
for it at all any more.
buy, there are no guarantees your home will increase in value – there will be
house price slumps – but over time chances are that they recover and go on to
increase again. Ideally buy cheap and sell for a lot more. You then have a
choice: invest the profits in the next property without borrowing any more and
in doing so you decrease the mortgage each time. Eventually you own outright
and without mortgage payments you have somewhere to live and don’t have to pay
for it at all any more.
Alternatively
you can do what most people do and buy a bigger, better more expensive house.
This isn’t a wealth creation strategy but it can be what you wanted your wealth
for, which makes it fine by me.
you can do what most people do and buy a bigger, better more expensive house.
This isn’t a wealth creation strategy but it can be what you wanted your wealth
for, which makes it fine by me.
From The Book; The Rules of Wealth by
Richard Templar
Richard Templar
(Read Rule
44 of Rule of Wealth tomorrow on Asabeafrika)
44 of Rule of Wealth tomorrow on Asabeafrika)
Read-to-Wealth Series
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