The market feels pretty crazy right now, so focusing on home equity might seem unrealistic or useless. But typically, homes tend to become more valuable over time, so buying a home means you’re investing in something that could be worth a lot more in the future if you take care of it.
While purchasing a home can feel daunting, it could help you build wealth. Plus, the decision is just the beginning. Consider buying a home as the starting point. You can borrow against your equity to make renovations or updates, for example.
To help visualize how equity might be worth it to you, let’s do the math using a rent vs buy calculator: If you purchase your home for $300,000 — with an assumed 20% down payment and a mortgage rate of 6.6%— after living in that house for just five years and two months, you may build enough equity to make buying ultimately a cheaper decision than renting. This hypothetical scenario applies if your home were to appreciate at historical rates compared to renting a house at the typical national rent of about $1,900 per month. Of course, it’s crucial to assess the options in your particular market and make a decision from there.
It might sound counterintuitive, but don’t get too caught up in the present. Instead, try to imagine what you want your life to be like five, 10 or 30 years from now. Would you rather own a home that is typically worth more than it was when you bought it, with the same or no mortgage payment? Or would you rather still be renting?
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