How Owning a Home Builds Your Net Worth

Harry Kimbrough
Monday, September 12, 2022
How Owning a Home Builds Your Net Worth
A significant financial accomplishment and source of pride is owning a home. One important factor is that owning a property increases your equity, which significantly raises your net worth. The connection between owning a property and increasing your wealth is particularly crucial at this time of high inflation.

Here are some reasons why starting your path to homeownership now would be a good idea if you're wanting to improve your financial security.

Owning a Home Is a Key Ingredient for Financial Success

A report from the National Association of Realtors (NAR) details several homeownership trends, including a significant gap in net worth between homeowners and rentersIt finds:

“. . . the net worth of a homeowner was about $300,000 while that of a renter’s was $8,000 in 2021.”

To put that into perspective, the average homeowner’s net worth is roughly 40 times that of a renter’s. This difference shows owning a home is a key step in achieving financial success.

Equity Gains Can Substantially Boost a Homeowner’s Net Worth

The fact that homeowners accumulate equity contributes significantly to the wealth gap between owners and renters. When you own a home, your equity increases as the value of your home rises and you keep up with your monthly mortgage payments. You are not afforded the same opportunity if you rent. According to a recent CNET article:

Homeownership is still considered one of the most reliable ways to build wealth. When you make monthly mortgage payments, you’re building equity in your home . . . When you rent, you aren’t investing in your financial future the same way you are when you’re paying off a mortgage.”

But on top of that, when your house increases in value over time, your equity in it grows even more. That significantly affects the wealth you create, as noted in a recent Bankrate article:

“Building home equity can help you increase your wealth over time, . . . A home is one of the only assets that have the potential to appreciate in value as you pay it down.”

In other words, when you own your home, you have the advantage of your mortgage payment acting as a contribution to a forced savings account that grows in value as your home does. And when you sell, any equity you’ve built up comes back to you. As a renter, you’ll never see a return on the money you pay out in rent every month.

Bottom Line

An essential component of increasing your net worth is house ownership. Let's talk right away if you're prepared to embark on your journey toward homeownership.


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