Why Home Equity Matters

Why Home Equity Matters

Homeownership remains an important part of the American Dream with many financial and non-financial reasons to consider. Most importantly, owning a home helps build family wealth. In a recent article, Freddie Mac wrote about the power of home equity:

In the simplest terms, equity is the difference between how much your home is worth and how much you owe on your mortgage. You build equity by paying down your mortgage over time and through your home’s appreciation. In a nutshell, your money is working for you and contributing toward your financial future.

Freddie Mac went on to show an example of where an individual bought a home for $150,000 with a 10% down payment ($15K) and a loan amount of $135,000. Secured by a 30-year fixed-rate mortgage at 4.5%, the buyer had a monthly mortgage payment of $684.03 (not including taxes and insurance).


After 7 years of making mortgage payments and assuming the historic national average of home appreciation at 3% per year, you can see the amount of home equity that has been built. That number will continue to grow as you continue to own the home.

In a recent Merrill Lynch published report, the average home equity among homeowners trend upwards as you get older.


Main Point

If you want to build wealth as a family, home equity is an important component to help you get there. As Freddie Mac states:

Now, if you continued to rent, and made the same payment of $684.03 per month, you’d have zero equity and no means to build it. Building equity is a critical part of homeownership and can help you create financial stability.

Meet with a real estate professional today to explore your wealth building options and put your housing cost to work for you and your family.

Contact us today to see how we can help you.

Source: KCM