Net Worth - The Key Ingredient to Home Ownership

The link below is a great blog from NAR with a great reminder to give your clients on why owning a home versus renting is so important. Sure there are the common reasons for why people should buy versus rent (here are 5 good ones):

1. They have to live somewhere anyway, so they might as well get ownership rights and have something they can call their own.

2. They want a hedge against inflation. In other words, rents historically go up. However, once a mortgage is in place, particularly a fixed rate mortgage, the payment for principal and interest stays the same.

3. They want the tax benefit of being able to deduct the mortgage interest.

4. They want the forced savings that paying a mortgage provides. Every payment provides a principal component that steadily pays the loan down, building up equity.

5. They realize that buying a home is a leveraged investment if they have a loan. The house goes up in value the same regardless of whether there is a loan or not. The leverage of a loan allows a higher return because the increase in value provides a greater return due to less invested initially.

But stated more simply, as the link below shows graphically, people who own their home historically have a much larger net worth than those that don’t. There are always those situations that justify renting over buying. But the argument can certainly be made, and the stats back it up, that those who own their homes generally have more money (net worth) than those that don’t.

http://economistsoutlook.blogs.realtor.org/2014/09/08/net-worth-of-homeowners-vs-renters/