As parents and grandparents, we always hope that the next generations will be better off than we are. Primarily this is that they will be happier, healthier, and more secure. Generational wealth are those assets we are able to leave to our family. This includes a family business, stocks, other securities, and, most importantly, real estate.
Over time, real estate can be one of the best investments we can make. For most people, their home is the largest financial asset they will own. For the first time home buyer, it is the achievement of a major goal. It is important to realize that this is not over. This short-term goal has now expanded to a lifetime.
Understanding Home Equity: Definition and Components
Home equity is the value of the real estate minus the outstanding balance of mortgages or other debt on the property. The increase in the value of the property is called appreciation. The start of home equity is the down payment and with each monthly mortgage payment, the principal will be reduced.
For the judicious purchaser, a house in a neighborhood with a good school system is a good choice. Regular maintenance throughout the neighborhood ensures property values over the years. Upgrades and improvements increase the value of the property and allows the area to thrive and be a contribution to the community.
These seemingly simple actions, plus the continued mortgage payments, will help increase the value of the property or build equity in the real estate. Yes, there will be downturns in the economy which will affect values, but riding through the cycles is all part of ownership. Increased equity has some positive side effects. Homeowners may borrow against the equity for home improvements or to cover other unexpected financial needs. It can also be a financial shelter for health care needs for older adults, which will relieve adult children of that burden or worry.
Using Home Equity to Cover Expenses: Benefits for Future Generations
Heirs of your home will come into possession of not just real estate but the wealth that can be derived from it. As mentioned, if you use the equity in your home to take care of medical or other expenses, your children and/or grandchildren will not need to worry about covering those costs. If your property remains intact after you pass away, your heirs will be able to handle your house and land as they wish. This can mean a ready-made rental property that will supplement their income or an outright sale that will provide them with cash to invest as they see fit.
If you had any concerns about the long-term benefits of home ownership, this should explain the present benefits of allowing your monthly payment to build equity (rather than rent that gains you little in the way of assets), providing a wonderful home for the current time, and providing a legacy for your heirs when you have moved on.
To start the process, just contact us at easyhouseloan.ca. One of our representatives will be happy to answer all your questions and guide you through the process to home ownership. We have extensive experience in the field and have many investors willing to help first-time buyers.