{"id":107540,"date":"2026-02-11T08:13:25","date_gmt":"2026-02-11T16:13:25","guid":{"rendered":"https:\/\/www.redfin.com\/blog\/?p=107540"},"modified":"2026-02-17T12:46:39","modified_gmt":"2026-02-17T20:46:39","slug":"how-does-owning-a-home-build-wealth","status":"publish","type":"post","link":"https:\/\/www.redfin.com\/blog\/how-does-owning-a-home-build-wealth\/","title":{"rendered":"How Can Buying a House Help You Build Wealth?"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Buying a home isn\u2019t just about having a place to live; it\u2019s one of the most reliable ways to build long-term wealth. While renting can offer flexibility, owning a home lets you build equity, benefit from potential appreciation, and access valuable tax advantages. Over the years, increasing equity and financial stability can turn your home into a valuable long-term asset.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In this Redfin article, we\u2019ll cover how buying a house can help you build wealth and how to make the most of your investment. Whether you\u2019re buying a <\/span><a href=\"https:\/\/www.redfin.com\/city\/5665\/MI\/Detroit\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">home in Detroit, MI<\/span><\/a><span style=\"font-weight: 400;\">, or a <\/span><a href=\"https:\/\/www.redfin.com\/city\/5155\/CO\/Denver\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">townhouse in Denver, CO<\/span><\/a><span style=\"font-weight: 400;\">, here\u2019s what to know about building home equity through homeownership.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Key takeaways\u00a0<\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Buying a home can build wealth through home equity, tax benefits, and more.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Your home may appreciate over time, helping you build wealth when you sell.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Buying a home you can afford, maintaining it, and making improvements can help protect your investment.<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-weight: 400;\">4 ways owning a home helps build wealth\u00a0<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">There are several ways that buying a home can help build wealth over time. Here are four of the main ways homeownership can achieve those benefits.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">1. Home equity<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">One of the most well-known ways that homeownership helps build wealth is through home equity. Home equity is the percentage of the home you have paid off. For example, if you put 20% down, you\u2019d own 20% of the home. As you pay off more of your mortgage, you&#8217;ll <\/span><a href=\"https:\/\/www.redfin.com\/blog\/how-to-build-equity-in-your-home\/\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">build more home equity<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">That growing equity can serve as a powerful financial tool. You can access it later by selling your home, refinancing, or borrowing against it for major expenses. For example:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><a href=\"https:\/\/www.redfin.com\/blog\/what-is-a-home-equity-loan\/\" data-wpel-link=\"exclude\"><b>A home equity loan<\/b><\/a><span style=\"font-weight: 400;\"> uses your equity as collateral, allowing you to borrow from yourself. You borrow a lump sum of cash, which you can use for various expenses like home improvements, investing, or paying off debt. These loans typically have lower interest rates than personal loans.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><a href=\"https:\/\/www.redfin.com\/definition\/home-equity-lineof-credit\" data-wpel-link=\"exclude\"><b>HELOC<\/b><\/a> <span style=\"font-weight: 400;\">is a line of credit that lets you borrow as needed from your home equity. <\/span><span style=\"font-weight: 400;\">The line of credit is open for a set number of years, and you can borrow money as needed. You will need to repay what you borrowed, and interest rates are typically variable.<\/span><\/li>\n<\/ul>\n<h3><span style=\"font-weight: 400;\">2. Tax benefits<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Owning a home means there are <\/span><a href=\"https:\/\/www.redfin.com\/blog\/tax-benefits-of-owning-a-home\/\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">tax benefits<\/span><\/a><span style=\"font-weight: 400;\"> available each year, some of which you may qualify for. Four of those deductions include:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Mortgage interest tax deduction:<\/b><span style=\"font-weight: 400;\"> This is the biggest ongoing tax benefit for homeowners. For those who itemize their taxes, you can deduct interest paid on your mortgage up to the IRS limits.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Property tax deduction: <\/b><span style=\"font-weight: 400;\">You may be able to deduct state and local property taxes paid on your primary residence (up to $10,000, $5,000 if married filing separately).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Home equity loan deduction: <\/b><span style=\"font-weight: 400;\">If you have a home equity loan, you may be able to deduct interest on the loan if you\u2019re using it for home improvements.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Capital gains exclusion:<\/b><span style=\"font-weight: 400;\"> If you decide to sell your home, you can exclude up to $250,000 ($500,000 if married filing jointly) in profit from capital gains tax.\u00a0<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">These benefits vary by individual, so consult a tax professional to understand which apply to you.<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">3. Potential for home appreciation<\/span><\/h3>\n<p><a href=\"https:\/\/www.redfin.com\/blog\/average-home-appreciation-per-year\/\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">Home appreciation<\/span><\/a><span style=\"font-weight: 400;\"> is another way that owning a home can help you build wealth. Homes are typically considered an appreciating asset, meaning their value likely increases over time. This makes it a more reliable way to build generational wealth, especially if you plan to pass on your home to heirs.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For example, if your home\u2019s value rises a little bit each year, that growth compounds over time. Combined with paying down your mortgage, you could have a significant profit when you sell. Regular maintenance and home improvements can also help your property appreciate faster.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cHolding period is another critical consideration.\u201d says Dean Mioli, Director of Investment Planning at <\/span><span style=\"font-weight: 400;\">Citadel Wealth Management<\/span><span style=\"font-weight: 400;\">. \u201cBecause transaction costs are significant, buyers typically need to own a home for several years to build meaningful equity. Much of that value tends to come from appreciation rather than principal paydown, particularly in the early years of a mortgage.\u00a0<\/span><\/p>\n<h3><span style=\"font-weight: 400;\">4. Passing down your home<\/span><\/h3>\n<p><span style=\"font-weight: 400;\">As mentioned above, owning a home allows you to build generational wealth by passing the home down to heirs. When someone inherits a home, they benefit from a stepped-up tax basis. This means the home\u2019s cost basis is adjusted to the current market value. When <\/span><a href=\"https:\/\/www.redfin.com\/blog\/selling-an-inherited-home\/\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">selling an inherited home<\/span><\/a><span style=\"font-weight: 400;\">, heirs will likely pay capital gains on any additional profits that exceed the home\u2019s current market value.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For example, you buy a home for $400,000 and it increases in value to $500,000 by the time it\u2019s inherited. The inheritors sell the home for $525,000. With the stepped-up tax basis, they would only pay capital gains tax on $25,000.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Balancing homeownership with retirement and investments<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Building wealth through homeownership works best when it fits into a broader financial plan. <a href=\"https:\/\/www.citadelwealthmanagement.com\/team\/dean-mioli\" data-wpel-link=\"external\" target=\"_blank\" rel=\"external noopener noreferrer\">Dean Mioli, CPA,<\/a> shares perspective on how buyers can balance the costs of owning a home with other long-term financial priorities:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cAlthough homeownership remains an important financial and personal milestone, rising home values should not be viewed as a substitute for savings or diversified investing. Maintaining consistent contributions allows investments to grow and compound, supporting long-term financial stability.\u201d<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cA common mistake among buyers is stretching to the maximum loan amount they are approved for, leaving little room for savings or lifestyle flexibility. Successful homeownership requires balancing housing costs with continued retirement savings and financial resilience, rather than prioritizing one at the expense of the other.\u201d<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cUnlike traditional investments, homes are influenced by personal design choices and buyer preferences, which can affect resale value. Ultimately, a home serves first as a place to live, with the potential to contribute to long-term financial security later in life, rather than as a replacement for retirement planning.\u201d<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">How to make your home purchase worth it<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Building wealth through real estate doesn\u2019t happen automatically. It takes smart choices and consistent maintenance. Here are key steps to make the most of your investment.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Buy a home you can truly afford<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">The first step to making homeownership worth it is buying a house you can truly afford. If you\u2019re stretching your budget each month to pay for your mortgage, it may not leave you with enough for additional expenses, investing, and an emergency fund. You can use a <\/span><a href=\"https:\/\/www.redfin.com\/how-much-house-can-i-afford\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">home affordability calculator<\/span><\/a><span style=\"font-weight: 400;\"> to estimate how much you can afford or a <\/span><a href=\"https:\/\/www.redfin.com\/mortgage-calculator\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">mortgage calculator<\/span><\/a><span style=\"font-weight: 400;\"> to get an idea of your mortgage payments.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">When buying a home, it\u2019s likely you\u2019ll get a pre-approval. A <\/span><a href=\"https:\/\/www.redfin.com\/blog\/mortgage-pre-approval\/\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">mortgage pre-approval<\/span><\/a><span style=\"font-weight: 400;\"> is an official letter from a lender certifying what loans you\u2019re qualified for and how much you can borrow. A good tip is to buy a home that\u2019s less expensive than what you\u2019re pre-approved for. This can help keep you below budget and have room to increase your offer price if needed.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">\u201cIn the current environment, fixed-rate mortgages are the most common choice, offering predictable payments over 15- or 30-year terms and the option to refinance if rates decline,\u201d Dean says. \u201cAdjustable-rate mortgages, which reset after an initial period, are less attractive under current rate conditions. For most buyers, the certainty of a fixed rate provides greater peace of mind and financial flexibility.\u201d<\/span><\/p>\n<p><span style=\"font-weight: 400;\">While high-interest rates shouldn\u2019t deter you from buying a home if you\u2019re financially ready, a lower interest rate can help save you money in the long run. The lower the interest rate, the lower your mortgage payments are over time, leaving you with additional income to invest.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As an example, you\u2019re planning to buy a home that costs $500,000 with a 20% down payment.<\/span><\/p>\n<table>\n<tbody>\n<tr>\n<td><b>Interest rate<\/b><\/td>\n<td><b>Mortgage payment<\/b><\/td>\n<td><b>Loan term<\/b><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">6.375% interest<\/span><\/td>\n<td><span style=\"font-weight: 400;\">$3,216 per month<\/span><\/td>\n<td><span style=\"font-weight: 400;\"> 30-year fixed<\/span><\/td>\n<\/tr>\n<tr>\n<td><span style=\"font-weight: 400;\">5.8% interest<\/span><\/td>\n<td><span style=\"font-weight: 400;\">$3,068 per month<\/span><\/td>\n<td><span style=\"font-weight: 400;\"> 30-year fixed<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><span style=\"font-weight: 400;\">In this example, you\u2019d save $148 per month or $1,776 per year. Over the lifetime of the loan, you may save up to $53,280.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Choose the right location<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Your home\u2019s location is one factor that you can\u2019t change. It can influence how much your home appreciates over time and whether you decide to stay in the area for years to come. Think about the neighborhood or city you\u2019re planning to live in. See whether it meets your lifestyle and needs.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Consider some of the following factors when choosing a location:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Amenities, like shopping centers and restaurants<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Proximity to public transit\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Access to major roads and highways<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Nearby parks, trails, or outdoor spaces<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">School districts<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Talk to your real estate agent about neighborhood trends, including where home values have increased most over time.<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Maintain your home<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Keeping your home in great condition can help you protect your investment. Regular maintenance prevents costly issues and preserves your property\u2019s value. Examples of seasonal maintenance include:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Servicing your HVAC<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Clearing your roof and gutters of debris<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Checking your smoke and carbon monoxide detectors<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Pruning trees and clearing dead limbs<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Inspecting your plumbing for leaks or drips<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-weight: 400;\">Invest in high-ROI home improvements<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Choosing the right home improvement project not only improves your day-to-day life but may also increase your home\u2019s value over time. There are many home improvement projects to consider, and some have a higher return on investment (ROI) than others.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">According to a <\/span><a href=\"https:\/\/www.angi.com\/articles\/remodeling-projects-highest-roi.htm\" data-wpel-link=\"external\" target=\"_blank\" rel=\"external noopener noreferrer\"><span style=\"font-weight: 400;\">2025 report by Angi<\/span><\/a><span style=\"font-weight: 400;\">, the projects with the highest ROIs include garage door replacements (194% ROI), entry door replacements (188% ROI), new siding (153% ROI), and interior painting (107% ROI). Choosing the right home improvement projects for your home will vary depending on your wants, needs, and budget.\u00a0<\/span><\/p>\n<p><b><i>&gt;&gt;Read: <\/i><\/b><a href=\"https:\/\/www.redfin.com\/blog\/home-improvement-projects-that-add-value\/\" data-wpel-link=\"exclude\"><b><i>8 Home Improvement Projects That Add Value to a Home<\/i><\/b><\/a><\/p>\n<h2><span style=\"font-weight: 400;\">Protect your investment<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Maintaining your home is one way to protect it, but there are other things you can do. <\/span><a href=\"https:\/\/www.redfin.com\/blog\/what-does-homeowners-insurance-cover\/\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">Home insurance<\/span><\/a><span style=\"font-weight: 400;\">, which lenders require, helps protect you and your home in case of damage, including some natural disasters. Depending on where you live, you may also want to consider specialized insurance plans such as fire or <\/span><a href=\"https:\/\/www.redfin.com\/guides\/what-does-flood-insurance-cover\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">flood insurance<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Home warranty isn\u2019t required, but it can help save you money if you have appliances that need repair. For example, a <\/span><a href=\"https:\/\/www.redfin.com\/blog\/what-does-home-warranty-cover\/\" data-wpel-link=\"exclude\"><span style=\"font-weight: 400;\">home warranty can cover<\/span><\/a><span style=\"font-weight: 400;\"> electrical systems, major appliances like a refrigerator, and central heating.\u00a0<\/span><\/p>\n<h2><span style=\"font-weight: 400;\">Is owning a home the right way to build wealth for you?<\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Homeownership can be a great way to build wealth over the long term, through home equity, tax benefits, and more. Buying a home you can truly afford, maintaining it, and making worthwhile investments can protect your investment over time. Speaking with a real estate agent or financial advisor can help you understand the benefits of building wealth through homeownership. <\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Owning a home can help you build wealth over time. Learn how buying a home can be a good investment through home equity, home appreciation, and more.<\/p>\n","protected":false},"author":537,"featured_media":75177,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"set","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[34276,10756],"tags":[34629,34630],"coauthors":[33440],"class_list":["post-107540","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buying-a-home","category-featured-post","tag-first-time-homebuyer","tag-homeownership-costs-and-benefits"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.7 (Yoast SEO v28.1) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>How Does Owning a Home Build Wealth? | Redfin<\/title>\n<meta name=\"description\" content=\"Owning a home can help you build wealth over time. 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