While purchasing a home could be your most significant goal, homeownership goes beyond just putting a roof over your head.
You can live comfortably and securely by diversifying your wealth portfolio. Building wealth gives you the freedom to make favorable financial decisions depending on your needs. People create wealth in different ways, but owning a home is one of the most efficient ways.
You might be asking yourself: how does homeownership build wealth? Keep reading to learn more.
Benefits of Owning a Home as a Way of Building Wealth
1. Better Retirement Saving Plan
According to the Urban Institute Research, buying your first home at an early age makes you well-prepared for retirement. You should consider purchasing a home now to enjoy living mortgage-free. That will make it possible for you to afford a comfortable retirement. You might also decide to sell your home, increasing your income. Essentially, homeownership opens the door to secure a better retirement.
2. Homeownership as an Investment Plan
Buying a home is a massive investment — the value of real estate increases with time. Even though there is no guarantee that your purchased home will appreciate, reports show that well-maintained homes increased in value. When you compare the prices of older homes, you will be shocked at how they have increased in value. The value of a home appreciates by an average of 3.6% annually. That shows that if you buy a home now, you will get huge profits when it is time to sell.
Homeownership provides you with a stable investment that eventually doubles. It is also a valuable asset that you can pass down to generations. Homeowners also make money by renting their homes. With rent rates on the rise, your home can become a passive and reliable source of income if you lease/rent it out.
3. Increases Your Net Worth
Irrespective of their income level, homeowners have a greater net worth than renters. That is because as your home appreciates, it builds more equity, increasing your net worth. You can be up to 45 times worth more than a renter by deciding to purchase a home. That makes homeownership a powerful tool in building wealth and increasing financial freedom.
4. Forced and Tax Savings
Let’s face it — saving is a challenging expedition. Most people find it difficult to save money, even though it is vital for financial freedom. Buying your own home acts as an automatic savings account. The equity in your investment increases after paying your mortgage, making mortgage payments work as forced savings.
Furthermore, owning a home comes with many tax benefits. Your profits are not taxed when you sell your home, meaning you will earn all your money. Not only that, but you’ll also enjoy deductions on your monthly mortgage payment and property taxes. Owning a home, therefore, helps you keep most of your earnings by reducing your taxable income.
5. Fixed Housing Payments
Living in a rental house makes you susceptible to the increasing rental prices. On the other hand, fixed mortgage rates give you a stable housing payment. That simplifies your financial plan, increasing your savings and investments. You will never worry about the ever-increasing rental costs; instead, you can focus on channeling the finances to other wealth creation portfolios. For instance, you can use the extra funds you would have used in paying for the additional rent on development projects and other investments.
Ready to Buy? Find a Guide
Even in the current market conditions, it is possible to find a home that you love and one that you can afford. Notwithstanding, the sooner you do it, the more you increase your chances of enjoying substantial long-term benefits.
With both home interest rates and prices projected to increase next year, waiting to buy can potentially put a serious dent in your family’s wealth. Contact Path & Post to find the perfect guide in one of our real estate experts.