Good Financial Plans Help Grow Wealth in Homeownership

In 2021, homeowners enjoyed a net worth 40 times that of renters.

Buying a home can make a tremendous wealth-building impact on one’s overall net worth--and careful budgeting after the purchase helps homeowners protect their investment.

Many consumers may not realize the large impact owning a home can make to their overall net worth. 

Indeed, Leslie Rouda Smith, President of the National Association of Realtors (NAR) noted, “Homeownership is rewarding in so many ways and can serve as a vital component in achieving financial stability.”

Per NAR, in 2021 renters realized a net worth of $8,000 while homeowners enjoyed a net worth of about $300,000—approximately 40 times that of the renter.  This disparity is caused by the equity homeowners build in their real estate investment—the value of a home appreciates while monthly mortgage payments remain constant.

“You have the benefit of your mortgage payment acting as a contribution to a forced savings account,” the post says.

However, owning a home also brings important financial responsibilities—consumers need to keep these costs in mind.

Don’t forget that maintenance and other costs associated with homeownership are necessary to build wealth in your property.  Such budgeting “will pay dividends.”

Expenses such as landscaping, repairs, etc. will likely equal 1-4% of the sale price—and don’t forget possible extras like a roof or furnace replacement which could add up to thousands of extra dollars.  One expert suggests new homeowners create a savings account especially for large repairs—setting aside $5,000-$10,000 is a good target.

Upgrades like kitchen or bath remodels can be pricey, too.  The average homeowner paid a median $15,000 in 2020 for such improvements.

Other pieces of your personal finance puzzle are also impacted by homeownership.  They include changing insurance needs and retirement plans--it is important homebuyers don’t neglect these other financial goals.

Owning a home can be a huge part of finding financial success, but it is good to remember homeownership also creates new fiscal obligations. 

Still, even if you are off to a late start in budgeting for a home purchase, “…with the right financial planning, you can keep yourself from becoming overwhelmed,” says Investopedia. 

What can you begin to do to reap the financial rewards of homeownership?

Post authored by Lora Bray.

Check out our reviews on Google.

You can find us here on Google.