Building Wealth Through Homeownership

There is a common misconception in today’s real estate environment that it is better to rent than to buy a home. That idea is likely due to the increase in home prices and interest rates over the past couple of years, but it is not generally the case for the majority of people. Unless you are planning on moving within the next two years or less, owning your own home is going to be the smarter financial decision. 

Purchasing a home is a long-term investment, one that compounds over time due to the fact that you are using your monthly mortgage payment to build equity in your home. The key difference between a rent payment and a mortgage payment is that while both provide you with a place to live, a mortgage payment allows you to retain the majority of the money that you put towards your monthly payment. Paying rent to a landlord is an expense that you will not receive any financial return from, whereas when you own a home and make a mortgage payment that money is used to pay down the debt on your home. The only money that is not retained by the homeowner is the interest portion of the payment, with the remainder being converted to equity in the home. That equity is an asset that you have at your disposal, and is something that you can redeem for cash when you go to sell your home. This allows you to invest in your home monthly much like you would by investing money every month in the stock market. And just like stocks your home’s value will historically appreciate over time, allowing you to sell for even more than you paid for the property when the time comes.

As you can see in the chart above, owning a home is an effective investment vehicle regardless of your income level. There is a very sizable difference in the net worth of a homeowner as compared to a renter, indicating that in the long term owning a home will lead to more financial success than renting. 

If you are tired of renting and are looking to purchase your own home to take advantage of the financial benefits, give our team a call! We have years of experience helping first time home buyers and would love to assist you on your journey to financial success. 

To learn more about how home ownership builds wealth, take a look at this article from Keeping Current Matters.