How Homeownership Can Help You Build Net Worth
A lot of people think that buying a home is just a huge money pit. And while it's true that there are some expenses that come along with owning a home, like maintenance and repairs, there are also a lot of ways that owning a home can help you build net worth. Here are just a few of the ways that homeownership can help you build net worth.
When you own a home, you're building equity. Equity is the portion of your home's value that you actually own outright—it's the difference between what your home is worth and how much you still owe on your mortgage. As your equity grows, so does your net worth.
2. Mortgage interest deductions
If you itemize your taxes, you can deduct the interest you pay on your mortgage from your taxable income. This can save you a significant amount of money come tax time, which means more money in your pocket to put towards other things—like savings or investments.
Over time, homes typically go up in value. So, as your home appreciates, so does your net worth. Of course, there's no guarantee that your home will appreciate (and in some cases, homes may even depreciate), but over the long run, homes tend to go up in value.
4 Forced savings plan
When you make mortgage payments each month, a portion of that payment goes towards paying down the principal balance of your loan. So, not only are you building equity with each payment, but you're also slowly but surely paying off your loan—which means that once your mortgage is paid off, all of the money you were putting towards mortgage payments each month will be yours to keep (or invest).
5 Stability and security
Owning a home can provide stability and security—both emotionally and financially. Emotionally, having a place to call your own can be incredibly fulfilling and satisfying. Financially, owning a home can provide stability because once you've paid off your mortgage, you'll no longer have a monthly housing payment (unless you choose to sell or refinance).
There are a lot of benefits to homeownership—benefits that go way beyond simply having a place to call your own. If you're thinking about buying a home, remember that purchasing property can help you build net worth in several different ways. From building equity to taking advantage of appreciation to creating forced savings plans, there are plenty of reasons why buying a home could be a smart financial move for you and your family.