Financial Benefits of Homeownership When Building Net Worth
In theory, putting your money into the stock market instead of your home could give you higher returns. In practice, however, few renters actually do invest successfully in the stock market. Owning a home has significant financial benefits, especially for people in Seattle where it’s expensive to rent. A report by the National Association of Realtors found homeowner’s net worth ranged from 31 to 46 times that of renters in the past 15 years.
As your home goes up in value, so too does your net worth.
Many people like to set financial goals for the New Year. Increasing your net worth is all about paying down debt and saving more. But homeowners’ net worth is positively influenced by factors beyond their control such as a booming real estate market in Seattle. As your home goes up in value, so too does your net worth. Even if you missed the beginning stages of the housing recovery, it’s still a great time to realize the benefits of homeownership.
Giving you an easy way to save
Some people like to invest in target-date funds in their retirement accounts because it’s an easy way to set it and forget it. Buying a home is a similar approach because you simply choose a loan and make monthly payments. If you choose a 15-year mortgage, you’ll build up equity twice as fast compared to a 30-year loan. Most people don’t think about financial goals. According to an article by Fox Business, a recent Allianz New Year’s Resolution survey showed 13 percent of those surveyed named financial planning as a goal.
Tapping it for a low-interest loan
Other financial benefits of homeownership relate to your ability to tap your home equity in certain situations. Most people can secure a home equity line of credit or a home equity loan at a lower interest rate compared to credit cards and personal loans. If you want to make some improvements to your home before you sell, you may consider a HELOC. The key is to only use your line of credit to make improvements that will actually increase the value of your home. If you don’t recoup the money you spent, you won’t see your net worth increase.
With a large down payment from the equity of your previous house, you can afford a more expensive home without larger monthly payments.
In the Seattle housing market, a large portion of buyers are step-up homebuyers who want to trade their starter homes for something larger and nicer. Being a homeowner gives you the financial foundation and home equity to afford more expensive homes. With a large down payment, you can afford a more expensive home without larger monthly payments. And, of course, there are always tax benefits of homeownership if you itemize your taxes.