The Basis of Financial Security

Home ownership provides the homeowner with financial benefits, but owning a home does more than that.

It can be the basis for a feeling of psychological and emotional well-being, too. Throughout the history of investing, real estate has been a safe "hedge"; against the vagaries of the general economy, and especially against the ups and downs of the stock market. It is a true safeguard against inflation, since a well-maintained, owner-occupied home almost always increases in value over time. Though the real estate market is subject to fluctuation from year to year, ownership over the long haul greatly favors the owner as opposed to the renter. Your home represents your greatest financial asset, and it also represents your largest monthly financial liability, in the form of a mortgage. A portion of each month's mortgage payment goes toward principal, that portion which directly reduces the mortgage balance. As each payment toward principal reduces the mortgage balance and as the value of your home increases through inflation, the difference, referred to as equity, can be liquidated upon the sale of the home.

Leveraging the equity in your home can translate into a large down payment available for the purchase of your next home, allowing you to "move up" with minimal out-of-pocket cost. The equity in a home can also be used as collateral, enabling its owners to purchase more real estate or make other long-term investments. Hence, the gradual building-up of your home's equity can be viewed as a disciplined approach toward saving. Alternatively, this equity can enable you to borrow less money or avoid borrowing at all, toward the purchase of your nexthome.

Even the interest you pay on your home's mortgage can be helpful from a tax perspective: homeowners or other property owners may re-coup a portion of interest charges as a credit towards the homeowner's federal tax liability.

In short, owning your own home can be invaluable to you and your family's financial well-being. Home ownership frees you from the prospect of rent increases and other factors over which renters have no control. After all, each check you write to your landlord builds wealth for your landlord, not for you. But perhaps more important is the peace of mind that comes with home ownership. Owning your home allows you to choose the area, community, and lifestyle in which you, your children, and perhaps even your extended family, will live.

In this sense, home ownership represents a crucial step toward security on many fronts throughout your life and the lives of your loved ones.