Buying a home is one of the greatest investments you can make. Why? Because it is one of the quickest ways to generate wealth. In fact, it’s been said that 90% of today’s millionaires built their wealth through real estate. While the cost of entry can vary from city to city, wise investments in real estate can wield staggering returns on investment.
Whether we rent or own, we all have to pay for housing monthly; however, those that own are usually better off financially. According to the U.S. Census Bureau, homeowners have a median net worth that is 80 times larger than that of renters. Similarly, a study by Harvard’s Joint Center for Housing Studies found that those who went from renting to owning from 1999 to 2013 gained a total of $85,400.
At LEGACY Home Loans, we want to make the path to homeownership accessible for all, so that our customers can pass on sustainable wealth from generation to generation.
Still don’t believe homeownership is the way to go? Here are five ways homeownership can build wealth.
1. Homes increase in value over time:
Unlike cars, which tend to depreciate in value over time, a home can increase in value from the very first day of ownership. The more your home appreciates in value, the more the owner profits via home equity.
2. Equity can be used for additional investments:
Everyone talks about home equity, but how can home equity be utilized to generate additional wealth? Before we answer that, let’s cover, what is home equity?
Home equity is how much of your property you actually own. Let’s say you purchase your home with a 20% down payment. Once your home loan closes you will have 20% equity in your home. As you pay down your loan, your home equity increases. As your home increases in value, your home equity also increases. Let’s say you purchase your home with a 20% down payment. Once your home loan closes you will have 20% equity in your home.
Now, what can home equity be used for? Home equity can be used in a multitude of ways. Your equity can be used to purchase another home, pay for home improvements such as a kitchen, bathroom remodel or to put in a pool. You can even use your home equity to purchase another home or to pay off your child’s college education. Some even use their home equity to pay off high-interest debt. The possibilities are endless!
3. In some markets, a mortgage payment can be the same or less than average monthly rent payments.
In certain markets, it can be more costly to rent a property than to own. Of course, this is the case in major cities like Los Angeles, which is going through a rental crisis, but it also occurs in other cities as well. In fact, a study by: GoBankingRates found that this is the case in 31 US Cities. The average rent price in Columbia, South Carolina, for example, is $1,125 whereas the monthly mortgage payment is $963. And in many other cities, the cost to buy isn’t too much more than the monthly rent. If this is the case in your city, purchasing a home can save you hundreds of dollars monthly. These savings can be used to invest in other investments, to pay off debt, or to simply improve quality of life.
4. Acts as a forced savings account:
According to Bankrate, 21% of Americans don’t save any money annually. For those that struggle with saving, a home mortgage can act as a forced savings account. With interest accruing monthly, they are able to put their money towards an investment that will yield more savings than with their personal savings account.
5. Homes have the ability to be passed on from generation to generation:
Heirloom homes, or homes that are passed down generationally, are wonderful assets in that they have usually been fully paid for. If the estate has been properly maintained and cared for, the home can be used to generate income in a multitude of ways. For example, the property can be rented out and used to generate a passive revenue stream. If the mortgage loan has been paid in full, this home can quickly turn into a cash-flowing rental. Another great advantage of inherited property is that it can also be used for a cash-out refinance to fund a business, used to purchase additional real estate. Some parents will even purchase homes with the intention of gifting the property to their children in order to pay for college tuition, or as a stream of income for their child during or after college.`
Give us a call to start your wealth-building journey to homeownership today! (844) 466-3669.
