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This Old House - Do-it-Yourself

How to Use Investments to Fund Your Home Purchase

Written by Posted On Wednesday, 26 July 2017 14:37

There is nothing that can compare to the pride of owning a home. You no longer have to worry about a landlord. You can also paint your wall colors any way you like.

 Not to mention, you can attach permanent fixtures and turn up the volume on your media player as loud as you want. Moreover, home ownership helps your family feel more stable and secure.

 Yet, you're probably wondering how to come up with a down payment. One way is through investments.

 Keep reading to learn more.

 Get into the Money Mindset

If you are tired of paying rent, then you must adopt a wealthy money mindset. Many people start by taking the Tim Sykes millionaire challenge.

You need to learn how to push yourself to earn more. One way is through trading and investments. While it is normal to have reservations about buying a home, there is another benefit--real estate appreciation.

 As a whole, real estate has consistently appreciated. This can be used as a hedge against inflation. So, the sooner you develop that millionaire mindset, the sooner you can live in the home of your dreams.

 Sell Your Shares Quickly

Once you have been approved for a mortgage, and need your down payment--it is time to sell a few of your shares. Say you need to sell $25,000 worth of stock for the down payment and closing costs. Take a look at your investments to determine which shares can be sold for the most profit.

The reason why it is important to sell quickly is that the share price can go down the longer you wait. To illustrate, if you sell 40 shares worth $625 each, then you would have $25,000.

Yet, if you wait a few days, and the share price goes down to $575, then you would have $23,000.

 As a result, you'll need to sell another $2,000 worth of stock to buy your home. While the stock price can go up, this is not the time to gamble.

 Sell Stocks with the Best Tax Outcome

The IRS will tax capital gains based on how long you have owned the stock. If you have investments that are over a year old, then you will get taxed at lower rates than ordinary income.

Depending on your tax bracket, you might not be taxed at all. On the other hand, short-term capital gains are taxed at the same rate as your marginal tax bracket.

 Don't Sell Long-Term Holdings

You don't want to sell investments made in long-term holdings. These stocks can be used as income in the future. Dividend stocks can be a safe bet if their share prices don't fluctuate too much.

This means you can probably buy those stocks back without incurring too much of an additional cost. Although, this isn't the case for fast-growing stocks where they could have a share price of $50 one day and $300 in a few months.

 Final Thought

If you want to buy a home, and think you can’t afford it, look into your investments. Just be cognizant of the types of stocks you choose and how quickly you sell them.

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