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#1 Financial Benefit of Homeownership: Family Wealth

#1 Financial Benefit of Homeownership: Family Wealth | MyKCM

While growing up, we were taught by our parents and grandparents that owning a home is a financially savvy move. They explained how a mortgage is like a “forced savings plan.” When you pay rent, that money is lost forever. When you make a mortgage payment, much of that money accumulates as equity in the home. So, what exactly is equity?

The equity in your home is the amount of money you can sell it for minus what you still owe on the mortgage. Every month you make a mortgage payment, and every month a portion of what you pay reduces the amount you owe. That reduction of your mortgage every month increases your equity.

A recent study by CoreLogic explained that homeowners gained substantial equity over the last twelve months, and are essentially sitting on large sums of cash in their homes. In the study, Frank Nothaft, Chief Economist for CoreLogic explained:

“The CoreLogic Home Price Index recorded a quickening of home price gains during the fourth quarter of 2019, helping to boost home equity wealth. The average family with a mortgage had a $7,300 gain in home equity during the past year, and a total of $177,000 in home equity wealth.”

For most families, their home is their largest financial asset. This increase in equity drives the net worth, or family wealth, of the homeowner. Renters are not earning that benefit. Instead, they’re building the net worth of their landlord.

Bottom Line

Home price growth will moderate during the pandemic. But once a cure is available, most experts agree that home values will again begin to appreciate at levels similar to what we’ve seen over the last several years. In the long run, our family elders will be proven correct: owning a home is a savvy financial move.

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Jean Becklund is a Luxury Real Estate Agent for EXP Realty. Jean has been living on Maui the past 36 years and has been a licensed real estate agent the past 16 years. Her knowledge of the market is vast. She does not limit her self to one area, she is familiar with resort properties, residential, vacant land, and the process it takes to build a home on Maui. Jean has had first hand experience she bought her first home in 1995 in Maui, owned 3 rental condo's, and designed and built a plantation home in 2005 where she resides today. Jean is the mother to 2 daughters Hayley who is her Broker and business partner and Chloe who is a waitress. Jean's sister Maureen used to tell her of the gentle rain and rainbows when she came to visit in the 1970's, that never left her mind. She moved to Maui in 1987 with a one way ticket and a set of golf clubs, landed her first job at Makena Golf Course and worked in the pro shop. Looking back those were the most precious days in Maui, a simple quiet life. Jean still heads back to Makena for her early morning swims. She loves to golf and joined the hole in 1 club in 2010. She plays pickleball daily, snorkels for sea shells and beach glass, rides her bike and plays her ukulele. Jean is also a pet lover with 1 senior dog and 5 cats. Jean loves her island lifestyle and would love to share her knowledge with you. She has a magnetic smile and infectious laugh, call her today!

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