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How Does Owning a Home Build Wealth?

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. Consider purchasing a home now to enjoy living mortgage-free when it’s time to retire. This decision can help make it possible for you to afford a comfortable retirement. You might also decide to sell your home, leverage your equity and increasing your income.

2. Homeownership as an Investment Plan

Buying a home is a massive investment — but 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. The value of a home appreciates by an average of 3.6% annually. With that number in mind, buying a home now can help position you for a longer appreciation time.

Homeownership provides you with a stable investment that eventually doubles. It is also a valuable asset that you can pass down to generations. Homeowners can 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

Regardless 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. Studies consistently show the net worth of people who own real estate is greater than people who don’t. That makes homeownership a powerful tool in building wealth and increasing financial freedom.

4. Forced and Tax Savings

Let’s face it — saving can be a challenging journey. 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 have a greater potential to earn a lot more when you sell, minus your agent’s fees. 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 Strategic 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.

Updated October 2023.

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