Home Ownership Leads To Wealth

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The Joint Center for Housing Studies at Harvard University recently conducted research about the correlation between homeownership and wealth. After the study was completed, they stated that “as a means to building wealth, there is no practical substitute for homeownership.”  How does owning a home help to build wealth? Here’s what the research at Harvard found:

• Having a mortgage forces a homeowner to save. Paying down the principal of a mortgage over time is like a savings plan whose deposits are growing.
• Although there have been times where home prices have abnormally increased as well as decreased, over time home prices still increase faster than inflation. 
• Many homeowners take advantage of the numerous tax benefits that are available to them. One benefit is mortgage-interest deduction, which allows homeowners to deduct the annual interest paid on a mortgage as well as property taxes. 
• Having a mortgage protects homeowners from the reality of rising rent costs. A mortgage also freezes the majority of a homeowner’s housing costs. Over time, the monthly mortgage payment stays the same, but because of inflation the real cost of the payment decreases. Over time a homeowner actually uses a smaller portion of their income on their house payments.
• Owning a home is, and probably always will be, a large part of the American dream and also has been shown to be a great way to create and build wealth.