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Your Wealth, Your Debt, and Your Home’s Value

Salaries are earned through hard work, but wealth is earned through the smart management of the money that you already have. To truly grow your wealth, you need to invest in the stock market and secure valuable assets — the largest and most important of which will be your own home.

By buying your own home, protecting your personal finances, and improving the space that you live in, you could meaningfully improve your net worth. Here’s how

How your home could make you wealthier

When you buy a home, you make the decision to plunk down a big chunk of cash to cover a down payment and closing costs, in exchange for paying a monthly mortgage payment instead of rent. Traditionally, this is a good call. It’s important to understand why.

When you pay rent, the money is gone forever. You get a month of living in your space, of course, but that’s it — years from now, when you move out, you’ll get nothing back but your security deposit. By contrast, paying into a mortgage is something that you’ll only do until you’ve finished paying off your mortgage.

Meanwhile, every payment that you make brings you closer to outright ownership of your home. When you sell your home, you can pay off your mortgage and pocket the difference (or put it towards an even nicer home). Assuming that you live in your space long enough for these advantages to cover closing costs, buying should be a better deal than renting.

And the value of your home isn’t static. If you’re lucky (and if you’re smart about how you care for your home), you could actually see your home increase in value. Owning your home could help you passively grow your wealth!

Of course, your finances are static, either. And there are situations in which a mortgage payment can become a burden.

Your mortgage and your finances

Mortgages may be a better deal than rent, but they’re not too flexible. Your home is highly illiquid, and your mortgage bill will come due every month, rain or shine.

If you suffer a major change in financial circumstances, or if you took out too much home debt in the first place, this can be a dire situation. In the worst-case scenario, foreclosure proceedings could lead to the repossession of your home.

But you might have options. Your lenders want your money, not your home — foreclosure is a lousy deal for borrowers, but it’s not the ideal situation for lenders, either. As such, your lenders may be open to refinancing agreements, which could restructure your loans in a way that allows you to make ends meet.

You can and should consider refinancing your loan with the help of your current lender or even outside companies. Do your research, check out at least one comparison of home loans for refinancing, and consider talking to a financial advisor or a lawyer who specializes in mortgages and foreclosures.

Improving the value of your home

How much you owe on your home is one side of the equation; the other side of the matter is what your home is worth. Even if you pay your mortgage on time every month, you could still end up losing money on your home if your home’s value drops over the years that you own it.

Some of your home’s value is beyond your control — to a certain extent, you’ll be at the mercy of the market forces that govern the local and broader real estate markets. But there are a lot of things about your home that you can control, and they’re important to your home’s value.

Keeping up with maintenance and repair needs is a key part of preserving the value of your home. Neglecting preventative maintenance and basic repairs can lead to more serious problems that drastically lower the value of your home.

You can take an active role in improving your space, of course. Redoing your kitchen or creating a nice outdoor space can increase the value of your home, explains an expert PVC deck installer. Getting the right improvements can make all the difference.

Your personal financial picture is complicated, but there are a few big parts of it that are easy to see. If you’re careful about your debt, pay your mortgage, and improve your valuable home, you’ll secure a brighter future.

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