Why do people buy houses they don’t plan to pay off? Most people don’t spend their entire lives paying off one house, so what is the financial benefit of getting a “starter home”? I’m new to the economics of real estate and I’ll take any wisdom offered.
In: Economics
When you sell the house, the money you get is used to pay off the rest of the loan. So if you buy a house for $400,000, pay off $100,000 and sell it again for $400,000, then you get $100,000(minus some closing costs) and you can use that towards another house. More importantly, houses tend to appreciate in value, so you might actually be selling the house for $500,000, in which case you get $200,000.
Compared to renting, where the money you pay just goes into someone else’s pocket, it’s usually a pretty good deal.
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