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  • Writer's pictureLaura M. Johnson

Unlock Your Financial Freedom: The Ultimate Benefit of Investing in Homeownership

Purchasing a home is crucial for building personal wealth, establishing prosperity, and achieving financal security. The primary source of most home purchasers' overall net worth value is the amount of ownership they have in property. This is because, unlike renting, owning a home provides an opportunity to build equity over time. This is because a portion of each mortgage payment made goes towards reducing the principal balance of the loan, which builds equity in the property.

As property values increase over time, so too does the value of that equity. Therefore, owning a home serves as a long-term investment with an ability to provide significant returns on its investment, or purchase. Furthermore, homeownership allows for greater control over your living expenses through fixed-monthly payments as a predictable, stable housing cost over a longer period of time.

Despite the upfront expense of a significant down payment, the benefits of home ownership is a wise investment for building wealth and establishing financial stability. since regular mortgage payments build equity in the property. This provides an opportunity for essentially creating a savings nest egg for the future. With each mortgage payment made, you are essentially paying rent to yourself and building a valuable asset that can be used in the future if necessary.

Homeownership creates financial stability by providing security through fixed-rate monthly mortgage payments, whereas monthly rent prices are typically subject to annual increases. Owning a home ensures housing stability and reduced risks for homelessness and displacement. Overall, investing in a home is an excellent method for gaining financial independence and creating future wealth as explained by NAR:

"Homeownership is the largest source of wealth among families, with the median value of a primary residence worth about ten times the median value of financial assets held by families. Housing wealth (home equity or net worth) gains are built through price appreciaition and by paying off the mortgage."

According to data from the Survey of Consumer Finances, released in September 2020 by the Federal Reserve, the median net worth of homeowners in the U.S. was $235,000 in 2019, compared to just $6,300 for renters. Studies have consistently shown that homeownership remains the largest source of wealth gains, and according to data from First American, this holds true across all income levels:

Sources: NAR, First American

Home equity, or the difference between the house value and the outstanding mortgage debt, is a major contribution to this disparity. Over time, as a homeowner pays down their mortgage balance while their home's value appreciates, the equity of the home increases and can be used to finance other investments or expenses.

For example, a family in a modest home in a middle-class neighborhood can see their net worth grow signficiantly over a decade or two as their home's value multiplies. However, homeownership does include a set of risks and challenges, such as maintenence costs, property taxes, or defaulting on the mortgage.

Foreclosure occurs when a homeowner is unable to make monthly mortgage payments due to unforseen circumstances such as job loss, divorce, unexpected medical bills, or other financial hardships. As seen during the Great Recession of the late 2000s, millions of Americans los ttheir homes due to massive layoffs and decreased home values.

Although the risk of foreclosure cannot be completely eliminated for any homeowner who borrows a mortgaged loan, it can be significantly reduced with emergency savings, a reputable lender, and the expert guidance of a real estate professional. Therefore, homeownership should be approached as a long-term investment with equal consideration for its financial implications and potential in building wealth. Let's connect today and start planning your journey towards creating wealth and financial freedom through homeownership!


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