Owning a home is a significant financial milestone to take pride in—one primary reason: the equity you build as a homeowner gives your net worth a big boost. And with high inflation right now, the link between owning your home and making your wealth is vital.
If you’re looking to increase your financial security, now could be an excellent time to start your journey toward homeownership.
Owning a Home Is a Key Ingredient for Financial Success
A report from the National Association of Realtors (NAR) details several homeownership trends, including a significant gap in net worth between homeowners and renters. It finds:
“. . . the net worth of a homeowner was about $300,000 while that of a renter’s was $8,000 in 2021.”
To put that into perspective, the average homeowner’s net worth is roughly 40 times that of a renter’s. This difference shows owning a home is a critical step in achieving financial success.
Equity Gains Can Substantially Boost a Homeowner’s Net Worth
The net worth gap exists between owners and renters because homeowners build equity. When you own a home, your equity grows as your home appreciates in value, and you make monthly mortgage payments. Unfortunately, as a renter, you don’t have that same opportunity. A recent article from CNET explains:
“Homeownership is still considered one of the most reliable ways to build wealth. When you make monthly mortgage payments, you’re building equity in your home . . . When you rent, you aren’t investing in your financial future the same way you are when you’re paying off a mortgage.”
But on top of that, your home equity grows even more as your home appreciates over time. That has a significant impact on the wealth you build, as a recent article from Bankrate notes:
“Building home equity can help you increase your wealth over time, . . . A home is one of the only assets that have the potential to appreciate in value as you pay it down.”
In other words, when you own your home, you have the advantage of your mortgage payment contributing to a forced savings account that grows in value as your home does. And when you sell, any equity you’ve built comes back to you. But, as a renter, you’ll never see a return on the money you pay out in rent every month.
Owning a home is an essential part of building your net worth. So if you’re ready to start your homeownership journey, let’s connect today.