Friday, September 9, 2022 / by Laura Larson
Here are some reasons why starting your path to homeownership now would be a good idea if you're wanting to improve your financial security.
- A Crucial Ingredient for Financial Success is Home Ownership
- Several homeownership trends are discussed in a report from the National Association of Realtors (NAR), including a sizable wealth disparity between homeowners and renters. It reveals:
“...In 2021, a homeowner's net worth was roughly $300,000 while a renter was $8,000"
The average homeowner's net worth is nearly 40 times greater than a renter's, to put that into context. This distinction demonstrates that acquiring a home is a necessary step on the road to financial success.
Gains in Equity Can Significantly Increase a Homeowner's Net Worth
The fact that homeowners accumulate equity contributes significantly to the wealth gap between owners and renters. When you own a home, your equity increases as the value of your home rises and you keep up with your monthly mortgage payments. You are not afforded the same opportunity if you rent. According to a recent CNET article: "Ownership of a home is still seen as one of the most dependable methods to accumulate wealth. Making regular mortgage payments helps you increase the value of your house...Renting doesn't give you the same financial future investment that paying off a mortgage does."
But on top of that, when your house increases in value over time, your equity in it grows even more. That significantly affects the wealth you create, as noted in a recent Bankrate article: "Increasing your home's equity can help you accumulate wealth over time...One of the few assets with the potential to increase in value as you make payments on it is a house."
In other words, the benefit of owning a home is that your mortgage payment serves as a contribution to a forced savings account that appreciates in value together with your home. Additionally, any equity you have accrued is returned to you when you sell.
Owning a home is an important part of building your net worth. If you’re ready to start on your journey to homeownership, connect with Laura Larson today.