Just about everyone who rents dreams of owning their own home. The freedom of homeownership is appealing. The idea of paying off the mortgage and not having rent anymore is also enticing to just about everyone. Beyond the satisfaction of owning a home, there are powerful reasons to consider taking this major life step. Homeownership does so much more than make finances easier or give you more lifestyle options. It can redirect entire lives and create positive situations that benefit families for many generations after the home is acquired.
Homeownership Leads to Wealth Growth
The statistics have long shown that owning a home is one of the most important factors in building wealth. In the U.S. specifically, homeowners have a median net worth that is 45 times that of renters (according to the National Association of Realtors). That's a massive difference, and it leads to wealth gaps in future generations - as wealthy parents have more resources available to help their children get a good start.
Here's the big question. Why is homeownership so important?
Equity is the concept that sits at the heart of using a home to build wealth. Home investments are inherently valuable because of this concept. The money paid into a mortgage retains value. This is opposed to money that is paid into rent, which is money that is gone forever.
When a home is eventually paid in full, there is suddenly a major cost that no longer exists. Furthermore, that savings can be passed to future generations when a home is inherited.
But, all of this is only part of the equation. The equity of a home can be leveraged for additional appreciating investments. The most common example is taking a home equity loan to pay a down payment on an additional house. This can apply to property investments, but it also applies to a simpler case. Parents can help their children buy their first house by using a home equity loan. This is a major part of how homeownership helps to sustainably build wealth across generational lines.
According to an article by the Washington Post, 32 percent of all first-time homebuyers receive help from family members for the purchase.
Homeownership Has Clear Social Benefits
Owning a home extends many social benefits in addition to building wealth. Having equity in a home can help with getting loans, jobs and other positions tied to social standing. Owning a home also leads to experience with core skills. The maintenance and financial skill required to keep a home are universal.
Perhaps most of all, owning a home is a lasting source of self-esteem. It's part of the traditional American dream. Feeling like you've made it has lasting mental and social value, and that can extend into many aspects of your life.
This leads to a positive feedback loop. A homeowner can use all of these mental, financial and social benefits to help their families. Parents with all of this standing have more resources to raise children who will eventually enjoy the same benefits. Family members in general can all glean from the bedrock advantages that stem from homeownership. One homeowner can create a lasting change that redefines life for many generations after.
It's clear that owning a home is one of the most important decisions a person can make in modern society. The benefits are undisputed, and they last. Once the decision is made, it's a matter of budgeting, saving and planning. Anyone can own a home, but it will take work. Thankfully, there are endless resources to get help with each stage of the process. When you're ready, you can get a mortgage and close on your first house.