Owning a home has great financial benefits.
In a recent research paper titled “Homeownership and the American Dream,” Laurie S. Goodman and Christopher Mayer of the Urban Land Institute explained:
“Homeownership appears to help borrowers accumulate housing and non-housing wealth in a variety of ways, with tax advantages, greater financial flexibility due to secured borrowing, built-in ‘default’ savings with mortgage amortization and nominally fixed payments, and the potential to lower home maintenance costs through sweat equity.”
Let’s break down five major financial benefits of homeownership:
1. Housing Is Typically the One Leveraged Investment Available
Homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. A 20% down payment results in a leverage factor of five, meaning every percentage point rise in the value of your home is a 5% return on your equity. If you put down 10%, your leverage factor is 10.
Example: Let’s assume you purchased a $300,000 home and put down $60,000 (20%). If the house appreciates by $30,000, that is not only a 10% increase in value but a 50% increase in equity.Continue Reading
