When you rent a home, you pay your landlord rent, and when you move from that home, you have nothing to show for it. With owning your home, your mortgage payment comes back to you in the form of equity in your home.
The best benefit of homeownership is that it is a “forced savings plan.” You make a mortgage payment each month. Part of that payment is applied to the principal balance of your mortgage. Each month you owe less on the home. The difference between the value of the house and what you owe is called equity.
Now, if your home has appreciated (worth more) since the time you purchased it and that increase in value also raises your equity. Over time, the equity in your home could be substantial. Recently, CoreLogic reported the average homeowner gained more than $65,000 in equity over the last five years.
In the years from 2006 to 2008, many homeowners used their homes by taking out equity to buy frivolous things. However, the home market crash was a massive lesson for everyone. The creditors and homeowners are not doing that anymore.
The number of homeowners that currently have at least 50% equity in their home is astonishing. According to the Urban Institute, 37.1% of all households in the country are mortgage-free. In a home equity study, ATTOM Data Solutions revealed that of the 62.9% of households with a mortgage, 25.6% have at least 50% equity. That number has been increasing over the last five years. Just do a little math, and you can see that 53.2% of all homes in this country have at least 50% equity right now. Of all homes, 37.1% are mortgage-free, and an additional 16.1% with a mortgage have at least 50% equity.
If you want to retire and move to a different city or move up to a larger home, you will have the equity to achieve your goal.