Although our world may seem to be in a new state of flux, many of the same pieces of timeless advice still apply. For instance, taking each day one at a time. Another timeless nugget of wisdom is to invest in property as a way to grow your net worth. Through the process of growing your equity, you can leverage your wealth, save more money and provide a better life for your family.
But what exactly is equity? Is it still relevant in discussions about the real estate market? What can you do to have the maximum impact on your equity? The answers to these questions and more are waiting below.
What is Home Equity?
Home equity is the difference between the amount you owe on your house (your mortgage) and the amount you have already paid. Basically, it is the amount of money you have actually put towards the purchase of your property. Therefore, your equity increases the longer you own your home and allocate funds towards your mortgage.
Can You Gain Equity while Renting?
Due to the nature of equity, you cannot accrue it while renting. Many people who support renting believe that the loss of equity is made up for with the lack of maintenance costs and property taxes. While this idea has been gaining traction in recent years, it may not be as valid as once thought.
How Equity Provides Greater Value than Renting
There are two flaws with the idea that renting can actually save you more money in the long run. The first flaw is fairly straightforward and supposes that paying money exclusively to a mortgage is really like paying money to your future self. Unlike paying rent to a property owner or landlord (where the money goes to someone else’s mortgage) with your own property, the money is entirely your own.
The second flaw in the logic is the direct comparison of net worth. In this First American article discussing the matter, renters show lower net worth in every wealth category except $127,000-$192,000. It is also interesting to note that the conclusion of this article states “…the most recent data reinforces that housing is one of the biggest positive drivers of wealth creation.”
So, what does all this mean for the importance of house equity? It means that house equity is still one of the best ways to increase your personal net worth, even as conventional wisdom begins to shift. Still, it is just as important to have the right professionals on your team when it comes to making a savvy realty purchase.
When you work with 2% Realty, you get access to exclusive listing sites, great service, low commission rates, and, of course, a savvy real estate agent. With just 2% of the sale price going to the real estate agents involved, they are the perfect option for both buyers and sellers. If you’re ready to start building your equity and saving for your future, make them your first call.