How Owning A Home Builds Net Worth

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There are many benefits to owning your own home and, according to the Federal Reserve’s Survey of Consumer Finances, one of the biggest benefits is financial. Over the past 15 years, for example, the net worth of the typical homeowner has been between 31 and 46 times greater than the net worth of the typical renter. In fact, the median homeowner had nearly $200,000 in net worth, while the median renter had just over $5,000. A homeowner’s wealth is built primarily from building equity. Equity, which refers to the value of a mortgaged property minus the amount owed, is accumulated through paying the principal portion of your monthly mortgage payment and also through any increase in the home’s value over time. As a homeowner pays their mortgage, they own an increasing percentage of their home’s total worth, which in turn increases their own net worth. And, even though homeowner equity is closely tied to home values, homeowners’ net worth still dwarfed that of renters even following the housing crash, when home prices plummeted. In fact, homeowner net worth was 34 times that of the typical renter’s in 2010, despite the housing market’s struggles. More here.

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