There are many benefits of homeownership, and one of the most important is that it is a key to building wealth. A recent study by the Joint Center for Housing Studies at Harvard University found that “the net worth of homeowners averaged $231,000 in 2013, compared with $5,700 for renters.” Homeownership provides stability and builds equity over time, which allows families to accumulate wealth. In this blog post, we will discuss five reasons why homeownership is the key to building wealth.

Homeownership Provides Tax Benefits

A major benefit of owning a home? The tax breaks. This is one of the top benefits for potential home buyers. Tax breaks are available for single-family homes, townhomes, condos, and manufactured homes. Homeownership tax benefits specifically come in the form of deductions.

The most common types of tax deductions include:

  • Mortgage interest
  • Real estate taxes
  • Private Mortgage Insurance
  • Profit from the sale of a home

While your tax filings will likely get a bit more complicated, the savings may be worth the extra effort. When you have enough qualifying tax deductions, it can lower your tax bracket and the amount of taxes you owe.

Appreciation of the Home

Houses generally go up in value over time. On average, home prices rose 18.8% year-over-year in 2021, according to the S&P CoreLogic Case-Shiller US National Home Price Index, which tracks 20 cities across the nation.

After 30 years, a $200,000 becomes a $545,313 house. That’s a 172.7% increase. A $500,000 house today at an annual appreciation rate of 3.4 percent interest rate becomes a $1,363,283 house in 2044.

According to Florida Realtors’ year-end report, at the end of 2021 the statewide median sales price for single-family existing homes was $348,000. That’s 20% more than the previous year. 

Builds Equity

Your home equity is the portion of your home that belongs to you, calculated by subtracting your mortgage balance from the home’s market value. There are two ways to build home equity: 

  • Make your monthly mortgage payments
  • Track your home’s appreciation over time

Home equity and appreciation may be considered together. As noted above, your home likely would grow in market value over time. Your equity also grows as you pay down your mortgage, with less of your payment going toward interest and more toward lowering the balance on your loan.

Building equity does take some time because it takes time to lower the principal balance owing on the mortgage loan—unless, of course, you make a large down payment or regular prepayments. Keep in mind that the length of time you have your home is a significant factor in how much equity you build and the appreciation you can realize. The longer you keep it, the more equity you obtain.

kcm-infographic rising home equity

Builds Credit

Payment history on your debts makes up the largest portion (35%) of your FICO score, which financial institutions use to determine the amount, rate and terms for loaning you money.

If you continue to make your full mortgage payment on time, your FICO should go up. As you reduce your mortgage loan balance, your FICO should incrementally rise as well, as 30% percent of your FICO is tied to how much you owe.

Conversely, late payments will hurt your FICO score. For example, a mortgage payment 30 days past due could drop your score of 720 to between 630 and 650. So, pay up and on time and your FICO will increase, making it possible to finance future purchases at favorable rates.

Stabilizes Your Expenses

One of the most common reasons people buy homes is for the immediate benefit of stable monthly payments. While rental prices can continue to go up, once you own a home, you have the option of steady monthly mortgage payments for years (if you opt for a fixed-rate mortgage; adjustable-rate mortgages are a different story). This benefit can help homeowners save money and more easily budget for other expenses.

According to, in April 2022, the median listing home price in Pensacola, FL was $299K, trending up 19.6% year-over-year. The median listing home price per square foot was $173. The median home sold price was $276.5K.

The table below estimates what your monthly mortgage payment would look like based on the current home values in Pensacola, FL.

estimated monthly payment pensacola fl

The link between financial security and homeownership is especially important today as inflation rises. But many people may not realize just how much owning a home contributes to your overall net worth. The gap between a homeowner’s net worth and a renter’s shows how truly foundational homeownership is to wealth-building.

If you’re ready to start on your journey to homeownership, contact us at aDoor Real Estate today!

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