Should this convince you to buy a house?
- There are many potential reasons to buy a house.
- One compelling reason is that homeowners have a higher net worth.
- It is still important to make sure you are in a good financial position to buy.
If you’re unsure about buying a home, there are many advantages to homeownership worth considering.
You may have more choices as to what type of home to live in and where to live when you are a homeowner rather than a renter. You also have more control over what you do with the house. And you don’t have to worry about being evicted or about the price if a landlord decides to sell the building, raise the rent, or simply move other tenants.
In addition to these benefits, there is also another really compelling reason to become a homeowner.
This could be a huge advantage of owning a home.
A big reason to become a homeowner instead of continuing to rent is that you have a good chance of becoming richer if you own your own place.
Investor and finance expert Graham Stephan recently sent out a tweet addressing the disparity in wealth between homeowners and renters. “US homeowners had a median net worth of $255,000 while renters had a net worth of just $6,300,” Stephan’s tweet read. “That’s a 40x difference!”
As Stephan explained, this discrepancy is “staggering.” But it also makes sense for a few reasons.
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First of all, the most financially stable people are more inclined to buy a house. Buying a home requires qualifying for a mortgage, which usually means having reasonable credit and making a down payment. People who can perform these tasks are also likely to have disposable income that they can use for other things, such as saving for the future.
Second, home ownership itself also helps people increase their net worth. When you own a home, monthly payments don’t just go into the owner’s pocket without you buying anything more than a place to live at the moment. With each payment you make, you own a greater percentage of your home.
Your mortgage payments are, in a sense, forced savings because you acquire equity in the valuable asset that is your property. By the time you pay off your mortgage, you should have a home worth hundreds of thousands of dollars, or even millions of dollars. Tenants, on the other hand, will only pay rent forever and won’t end up owning anything.
Third, the value of your home can also increase over time, as land and property prices generally appreciate. So your home will earn you money by increasing its value even while you live in it. Her house is likely to end up accounting for a large chunk of her net worth, especially if it ends up being worth hundreds of thousands of dollars more than he paid for it.
However, homeownership is still not the right option for everyone.
The fact that owning a home can help you build wealth is certainly a compelling reason to buy a property. But on the other hand, if you are not financially prepared, owning a home can destroy your wealth. This is because if you can’t make your monthly payments, you could end up in foreclosure and lose your property, which will seriously damage your credit as well.
So while you may want to aspire to own a home one day, you need to make sure you have the money for a down payment, the financial credentials to qualify for an affordable home loan, and a steady income that will allow you to make the Payments. during the next decades. If you can do these things, becoming a homeowner could be the path to ending up with a higher net worth.