Building Wealth Through Homeownership
Homeowners have a net worth of almost 36 times more than that of renters. (source: The Federal Reserve Board) Homeownership builds wealth, brings stability, increases pride, and fulfills the American Dream. Owning a home is an accomplishment and a commitment that will help build financial security and stability for you and your family.
Homeownership is an investment that has consistently, on a long-term basis, shown a positive return. Homeownership fosters community involvement and pride in a neighborhood. Homeownership builds equity and wealth, which allows you to plan for future goals like your child’s education or your retirement. The median net wealth of most modest-income homeowners is almost $60,000 compared to less than $10,000 for renters in the same income group (source: The Federal Reserve Board–Survey of Consumer Finance). Tax laws are very kind to mortgage borrowers’.
The typical homeowner that pays a $1,000 mortgage payment will realize a tax savings allowing their mortgage payment to be reduced by at least $120 month. Roughly 60 percent of the average American’s wealth is the equity in his or her home. Homeowner median net wealth was $150,500 in 2001, while the average renter’s net wealth was $4,810. Homeownership is an asset that builds more equity than any other investment. How do you build up your net worth? Through appreciating returns on your home. Below is an example of appreciating returns. We have taken a $110,000 home price (with a mortgage amount of $100,000) and assuming a 4.5 percent appreciation rate, your home will be worth $114,950 in the second year of ownership, $120,123 the third and so on. Not only do you earn a rate of return on your original purchase price, you also get a return on any subsequent appreciation.
Benefits of Homeownership
Homeownership is an investment that has consistently, on a long-term basis, shown a positive return. Homeownership fosters community involvement and pride in a neighborhood. Homeownership builds equity and wealth, which allows you to plan for future goals like your child’s education or your retirement. The median net wealth of most modest-income homeowners is almost $60,000 compared to less than $10,000 for renters in the same income group (source: The Federal Reserve Board–Survey of Consumer Finance). Tax laws are very kind to mortgage borrowers’.
The typical homeowner that pays a $1,000 mortgage payment will realize a tax savings allowing their mortgage payment to be reduced by at least $120 month. Roughly 60 percent of the average American’s wealth is the equity in his or her home. Homeowner median net wealth was $150,500 in 2001, while the average renter’s net wealth was $4,810. Homeownership is an asset that builds more equity than any other investment. How do you build up your net worth? Through appreciating returns on your home. Below is an example of appreciating returns. We have taken a $110,000 home price (with a mortgage amount of $100,000) and assuming a 4.5 percent appreciation rate, your home will be worth $114,950 in the second year of ownership, $120,123 the third and so on. Not only do you earn a rate of return on your original purchase price, you also get a return on any subsequent appreciation.
Appreciating Returns
Total Appreciation After Five Years: $21,177
After the first year, you now only owe $98,000 on a home that is worth $114,950, and you have nettet a $4,950 increase in the value of your home. As your debt decreases and the home value increases, you accumulate wealth from the value of your home. Each year as your home appreciates and you cotinue to pay down your mortgage debt, you increase your own net worth. The numbers tell the story about the financial aspects of becoming a homeowner. Again, homeownership also adds value to communities, has positive effects on children, and contributes to increased voter participation rates.
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