Growing up, I was taught by my parents and grandparents that owning a home is a financially savvy move. You may have heard this too. They explained how a mortgage is like a “forced savings plan.” They would say that paying rent was like throwing money down a toilet, and was building equity for the landlord and not for me. They then explained that by owning a home and making a mortgage payment each month that money would accumulate as equity in the home. But, at the time I would think what exactly is equity?
Equity in your home is the amount of money you can sell it for minus what you still owe on the mortgage. Every month you make a mortgage payment, and every month a portion of what you pay reduces the amount you owe. This reduction of your mortgage every month increases your equity.
A recent study by CoreLogic explained that homeowners gained substantial equity over the last twelve months, and are essentially sitting on large sums of cash in their homes. In the study, Frank Nothaft, Chief Economist for CoreLogic explained:
“The CoreLogic Home Price Index recorded a quickening of home price gains during the fourth quarter of 2019, helping to boost home equity wealth. The average family with a mortgage had a $7,300 gain in home equity during the past year, and a total of $177,000 in home equity wealth.”
For most families, their home is their largest financial asset. This increase in equity drives the net worth, or family wealth, of the homeowner. Renters are not earning that benefit. Instead, they’re building the net worth of their landlord. If you are currently renting and would like to know more about what the process of buying a home looks like, and what programs might be available to you please reach out to me. I would love to talk with you, no pressure, no sales tactics ever, just the guidance and advice you are looking for.