Save For the Future by Becoming a Homeowner
We often bring up the age-old discussion of buying versus renting and which option is best for you. Not only can buying a home allow you to put down roots, make memories and become part of a community, but it also contributes to the wealth of your family. Homeownership is a form of “forced savings,” meaning every time the mortgage is paid your net worth grows. This is in stark contrast to renting, where every time rent is paid, your landlord’s net worth increases. According to a study conducted by the Federal Reserve, a typical homeowner’s net worth was $195,400, while that of a renter was $5,400, making a homeowner’s net worth 36 times greater than a renters. Years ago, we were taught to pay a large down payment on a home to get a fixed mortgage rate and then pay off that mortgage as soon as possible. Just as times have changed, so have the rules of money. Loans requiring little or no down payment are now available, which frees up savings for other investments that can also grow over time. People are more willing to relocate for a better employment opportunity, and we are just more mobile as a society than we once were. Today’s homebuyer doesn’t plan to stay in their home for 30 years and pay off the mortgage, but instead, build equity over a few years of owning and then trade up to a larger home, or an older buyer may move to a home that has no yardwork or stairs to climb. According to Pulsenomics’ most recent Home Price Expectation Survey, over the next five years, home prices are expected to appreciate 3.24% per year on average and to grow by 21.4% cumulatively. What does this mean for homeowners and their equity? Since the experts predict that home prices will increase by 4% within the next year, it means that a $250,000 house bought in January will have gained over $10,000 in equity in just one year. Over a five-year period, the equity will increase by over $43,000. This figure does not even take into account monthly principal mortgage payments. In many cases, home equity is one of the largest portions of a family’s overall net worth. Another perk of homeownership is being able to write off any interest and property tax you paid on your home throughout the year! The benefits of homeownership are indisputable and not only does it give you something to be proud of, it also offers you and your family the ability to build equity and net worth. If you’re ready to start growing your future, contact us at Dragas today!