Five Reasons Why Home Ownership is a Great Wealth Builder
June is National Homeownership Month. Homeownership has long been considered a cornerstone of the American Dream. Beyond providing shelter and a place to call your own, owning a home can be a powerful tool for building wealth. Let’s explore the reasons why your home has financial potential.
The potential for property appreciation is one of the primary advantages of home ownership. Real estate values tend to increase over time, allowing homeowners to build equity. As the value of your home increases and your share of equity builds, your net worth grows along with it, contributing to long-term wealth accumulation and the potential for more favorable credit.
Homeowners enjoy several tax advantages that can contribute to wealth building. Mortgage interest and property tax payments are generally tax-deductible, and may reduce overall tax burden. But be sure to check with the laws and a tax expert in your area. Additionally, if you sell your primary residence, you might be eligible for a capital gains tax exemption, further boosting your dollars.
Owning your own real estate can give you options. If you have extra room, you might be able to rent out a portion of your home with several possibilities. You may want a long-term tenant under a lease agreement. You might be able to rent out rooms to students who may only need it a semester at a time or you may lease only during a shorter summer term. Bedrooms or guest buildings could be rented out short-term through a third party hosting platform that caters to travelers or vacationers. If you have a large enough parcel of land, you may be able to lease space for a communications tower. Be sure to seek advice from an experienced real estate attorney to check your options and avoid pitfalls before leasing.
Home Equity Loans and Lines of Credit
The equity you’ve built into your home can become a source of financing. Homeowners can tap into their home equity through loans or lines of credit, providing access to additional funds for investments, home improvements, education, or other ventures. These borrowing options can be advantageous compared to other types of loans and may have lower interest, allowing you to leverage your home's value to fund renovations, repairs or other expenses.
Real estate can be an effective hedge against inflation. As the cost of living rises over time, housing prices tend to keep pace. This potentially preserves and increases the value of your investment. Owning a home helps protect your overall wealth from the effects of inflation, allowing you to maintain purchasing power and financial security.
Homeownership is not only a place to call your own but also a powerful wealth-building tool. Through property appreciation, tax benefits, leverage, access to home equity, and protection against inflation, homeowners have the opportunity to build substantial long-term wealth. While it's essential to consider individual circumstances and market conditions, the potential benefits of home ownership make it an attractive avenue for wealth accumulation.
Are you interested in buying a home but aren’t sure where to start?
This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.