FAMILY WEALTH: The Number 1 Benefit of Homeownership

While growing up, I understood that owning a home was the best move you could make, financially stable and smart! It was explained that a mortgage is like a “forced savings plan.” When you pay rent your just wasting money that you’ll never see again! When you make a mortgage payment much of that money accumulates as equity in the home. And what is equity you may ask? The equity in your home is the amount of money you can sell it for minus what you still owe on the mortgage. Every month you make a mortgage payment and every month a portion of what you pay reduces the amount you owe. That reduction of your mortgage every month increases your equity.

A recent study by CoreLogic explained that homeowners gained substantial equity over the last twelve months, and are essentially sitting on large sums of cash in their homes. In the study, Frank Nothaft, Chief Economist for CoreLogic explained:

“The CoreLogic Home Price Index recorded a quickening of home price gain during the fourth quarter of 2019, helping to boost home equity wealth. The average had a $7,300 gain in home equity during the past year, and a total of $177,000 in home equity wealth.”

For most families, their homes is their largest asset. This increase in equity drives the net worth, or family wealth, of the homeowner. Renters are not earning that benefit. Instead, they’re building the net worth of their landlord.

Bottom Line

Home Price growth will moderate during the pandemic. But once a cure available, most experts agree that home values will again begin to appreciate at levels similar to what we’ve seen over the last several years. In the long run, our family elders will be proven correct: OWNING A HOME IS A SAVVY FINANCIAL MOVE.

*Understand the opinions and information shared here should not be construed as investment advice.