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2016-04-13 20:02:27
How to Make a Million

Today I was reading an article in Kiplinger's Personal Finance magazine (May 2016 issue), which I found quite interesting and just wanted to share it with you.

The title caught my eye first, 'HOW TO MAKE A MILLION'.  Now you have to admit that will get your attention.  The article in question gave 10 ways to make a million dollars.  Would you believe #5 is 'OWN A HOME'?  Here is the article:

'Derek and Lauren Ross did't buy their home in Oak Park, Calif., because they thought it would make them rich.  The bought it because the community of 14,000, about 40 miles from Las Angeles, has some of the best schools in California, plus lots of parks and open space.  Nonetheless, their investment has paid off.  They bought their two-story home in 2002 for about $542,000.  Today it's worth more than $800,000, Derek estimates.

Home prices don't always rise, of course, and the housing bust wiped out the equity of plenty of homeowners.  But over the long term, you're more likely to reach your $1 million goal if you own a home than if you rent.  When you buy a home with a fixed-rate mortgage, you basically lock in your monthly housing payment.  If your income rises, you'll pay an increasingly smaller share of it on housing, which means you'll have more to save and invest.

Low interest rates have also made homeownership more affordable.  The average rate for a 30-year, fixed-rate mortgage has been less than 5% since 2009.  The National Association of Realtors' housing affordability index estimates that at the end of 2015, mortgage payments consumed only about 15.3% of household income, based on median family income and median home prices.

Derek says they refinanced several times to lower their interest rate and make some changes to the yard that reduced their water bills - an increasingly significant expense in California.  'The value of our home has increased dramatically, but our overall expenses have gone down,' he says.

Homeowners can deduct interest up to $1.1 million of mortgage debt.  This deduction is particularly valuable during the first half of your mortgage term, when most of your monthly payment will consist of interest.  But the most lucrative tax break comes when it's time to sell.  As long as the home is your primary residence and you've lived in it for two of the past five years, you can reap up to $250,000 in tax-free profit, or $500,000 if you're married.  

The equity you've accumulated gives you options that can increase your wealth.  You can use payments from a reverse mortgage - or money from selling your home, if you plan to downsize - to supplement retirement income.  Then you can let other investments grow or delay taking Social Security benefits.  If you wait to claim benefits until after your full retirement age (between 66 and 67, depending on when you were born), you'll earn a delayed-retirement worth 8% a year for each year you delay until age 70.'

Kiplinger's Personal Finance Magazine May 2016 issue

It's great to hear this story, hope you enjoyed it!!! And of course if you want to know what the other 9 ways are, pick up the magazine, it's a good read.





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2016-04-13 20:02:27
How to Make a Million

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