Becoming a homeowner falls into a lot of categories for the uninitiated–exciting to have a place of your own, scary to make the big decision–but ultimately, owning a home adds a huge asset to your financial portfolio and gives you one of the most value-appreciating investments we know.
The value of being a homeowner can’t always be quantified. For some, the intrinsic value of homeownership is worth more than the price of the home; however, for others, there are significant and measurable financial ramifications. Here’s what we know about the value of being a homeowner.
Owning a Home Builds Wealth
No matter how you slice it, owning a home is a huge wealth booster. For the average first time home buyer, purchasing a home will likely double their overall asset value. Yes, purchasing a home will likely initially require a significant cash outlay in the form of a down payment and closing costs, in the end, you can immediately add an asset of significance in the value of your home to your personal balance sheet.
Much like how businesses account for big, financed purchases, you can very much do the same. For most of us, we’ll be financing our home purchase through financing, but even still, you own the asset in question (your house) and can consider that part of your overall wealth. And the good news is that unlike business assets that depreciate in value, your home will increase in value over time therefore adding to your personal wealth.
Owning a Home Boosts Financial Security
Purchasing a home not only adds to your personal balance sheet, but it boosts your overall financial security almost immediately. The reason being, you now have both an asset (the home) as well as a liability (your loan) that can work in your favor in both instances.
We’ve already covered how a home can increase your wealth, but how can a liability help improve your financial security? Simply, by taking out a loan on a home, making your monthly payments, and gaining equity on your mortgage, you prove to creditors and credit reporting agencies that you’re a worthy borrower. Making regular, timely payments will improve your credit score and every payment towards your loan will improve your overall ownership or equity in your home.
You Eliminate Rental Payments
It may seem obvious but to some prospective home buyers, eliminating rent can be an appealing reason to pull the trigger and buy a home. There are many ways to justify mortgage payments versus rent payments to a landlord, but one of the most appealing to potential buyers is that rent doesn’t really do anything for your bottom line or add to your wealth.
There’s absolutely nothing wrong with renting, but when you look at the math involved from a landlord’s perspective, it makes much more sense to make mortgage payments on a home you own instead of paying a landlord. For example, a landlord (just as a homeowner) must pay for their mortgage, insurance, taxes, potentially utilities, and homeowner’s association fees. On top of that, landlords must factor in a profit and all of this is passed along to renters.
Get Prepared to Buy
Purchasing a home is a great way to improve your overall financial standing and will overall make you happier with the money you spend every month. However, it’s important to understand where to start.
In order to get into a house of your own, get pre-qualified for a mortgage by contacting Tidewater Mortgage Services, Inc. Tidewater’s expert loan officers will help you get pre-qualified in as little as 24 hours and find a mortgage product that’s right for you!