Monday, March 28, 2022 / by Raj Jaggi
Homeownership is Crucial to Accumulating Wealth
With inflation on the rise, the link between financial stability and homeownership is more vital than ever. However, many individuals are unaware of how much owning a property adds to your entire net worth. As President of the National Association of Realtors (NAR) Leslie Rouda Smith puts it:
“Homeownership is rewarding in so many ways and can serve as a vital component in achieving financial stability.”
Here are some of the reasons why homeownership is a great objective to pursue if you want to improve your financial stability.
Having a Home is a Necessary Part of Financial Success
Several homeownership trends and statistics, including the gap in net worth between homeowners and renters, are detailed in a recent NAR report. It discovers:
“. . . the net worth of a homeowner was about $300,000 while that of a renter’s was $8,000 in 2021.”
Equity Gains can Significantly Increase a Homeowner's Net Worth
To put it another way, when you buy a home, your mortgage payment serves as a contribution to a forced savings account. And any equity you've built up is returned to you when you sell. You will never see a return on the money you pay in rent each month as a tenant.
To put it in simple terms, NAR says:
“Homeownership has always been an important way to build wealth.”
“. . . the net worth of a homeowner was about $300,000 while that of a renter’s was $8,000 in 2021.”
Equity Gains can Significantly Increase a Homeowner's Net Worth
The difference in net worth between homeowners and renters is mostly due to the fact that homeowners accumulate equity. As a homeowner, your equity builds as the value of your property rises and you make your monthly mortgage payments.
To put it another way, when you buy a home, your mortgage payment serves as a contribution to a forced savings account. And any equity you've built up is returned to you when you sell. You will never see a return on the money you pay in rent each month as a tenant.
To put it in simple terms, NAR says:
“Homeownership has always been an important way to build wealth.”
Conclusion
The disparity between a homeowner's and a renter's net worth demonstrates how important homeownership is to wealth accumulation. Talk to a trusted real estate advisor today if you're ready to begin your journey to homeownership.
