Homeownership has historically been one of the most tried and true ways to build wealth. Homeownership provides an avenue for building real wealth over time which is built in large part by building equity.

Every time you pay your monthly principal payments on your home, you gain equity. And, over time, appreciation is a critical part of homeownership which allows you to create financial stability.

Today, we're taking a look at why you should own your own home to build your wealth.

First off what is home equity? It’s the difference between your home’s current market value and the dollar amount you currently owe on your mortgage.

To come up with an estimation of your equity all you need to do is subtract your mortgage balance from the market value of home. To figure out how much you owe on your mortgage just look at your last month's statement or chat with your lender. Give us a call and we can also help you out.

So, is it better to be a homeowner or a renter when it comes to building wealth? Renters usually don’t have to directly pay for property tax, repairs, and insurance on their own, as all of these are included in the rent payments.

They also have to pay a profit margin for the landlord. This means that overall you’ll save less when you rent. Most people will find that being a homeowner leads to a much greater amount of wealth accumulated.

In 2020, equity in Canadian homes rose 8.5% on average VS 1.9% in 2019. So how can homeowners cash in on their housing wealth? In order to leverage their wealth, two of the most common methods involve either selling or refinancing. When you sell your home you gain the equity that has been built up over time in the sale.

If you fully paid off a $250,000 mortgage and sold your home for $300,000, you would make your $250,000 back plus an extra $50,000 on your sale.

When you refinance, you take your current mortgage and you use some of the equity that you’ve built up and you may be able to take out a good amount of cash while keeping your monthly payments nearly the same. You could use this to buy a rental property or other solid investments. If you do decide to refinance, make sure to be wise with the items that you purchase. Don't buy crap you don't need or can't afford.

From 2006 to 2008 many people used all of their equity to purchase things that they just simply couldn’t afford and this was devastating. Our current challenge is that of rising food costs, employment issues, and overall uncertainty about the future.

In tough situations, home equity can give people the option of selling their home and tapping into their equity through refinancing and this can help people whether the economic shock they may be experiencing. 

So what can we expect going forward? The vast majority of experts, ranging from market strategist real estate and investment experts and economists are calling for home prices to continue appreciating this year.

If you are interested in becoming a homeowner in Sarnia-Lambton give Sean a call today at 519-331-3746.