How Owning a Home Can Build Your Net Worth

With inflation right now, the link between owning your home and building your wealth is especially important. If you are looking to increase your financial security, now could be a good time to start on your journey toward homeownership.

Owning a Home Is a Key Ingredient for Financial Success

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 dollars  while that of renters was 8,000 in 2021.

To put that into perspective, the average homeowner net worth is roughly 40 times that of a renter. This difference shows owning a home is a key step in achieving financial success.

Equity Gains from a Home can Substantially Boost Net Worth

The net worth gap between owners and renters exists in large part because homeowners build equity. When you own a home, your equity grows as your home appreciates in value and you make your mortgage payments each month. As a renter, you do not 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 are building equity in your home. . .When you rent, you are not investing in your financial future the same way you are when paying off a mortgage.

But on top of that, home equity grows even more as the home appreciates in value over time. That has a major 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 has 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 acting as a contribution to a forced savings account that grows in value as your home does. And when you sell, any equity built up comes back to you. As a renter, you will never see a return on the money you pay out in rent every month.

Bottom Line

Owning a home is an important part of building your net worth. If you are ready to start on your journey to homeownership, please connect with me today.