Why Owning a House Can Set You Free Financially
Home ownership is part of the dreams of many families and individuals. Owning a home can have its pros and cons. Some will view a home as an asset, while others view it as a liability. Many people do not want to become homeowners, as they want to become financially free by the early age of 30. For them, home ownership will slow them down, so they opt to rent. Your home can be your biggest investment, and when you own it fair and clear - without a mortgage - it can be your biggest asset, depending on your financial portfolio. However, if your home is robbing you of a lifestyle, and is taking money out of your pocket, then it becomes another liability. However, owning a home can set you free financially. Is this a contradiction? It is not, it depends on how you own the home or homes, and how you manage the cash flow.
For a home to become an asset, it has to bring money to your pocket, instead of taking it away. This happens when you don't have a mortgage on it, and all the equity is yours for when you need it. It can also happen in the case of a reverse mortgage (must be 65 and older) and instead of you paying a monthly payment, the bank sends you a check. In this case, the bank uses the equity in your home, but the home will be theirs when you die. Another scenario - when you owe a home and the home is making you money to cover the mortgage - as it is in the case of renting the home. Even a $100 in cash flow at the end of the month will be an asset since the renter is paying the mortgage, and you are keeping the difference after all costs are covered. In this scenario, owning one or more properties can make you financially free.
The issue here is to use your home as an asset and not a liability. Another scenario will be the individual who has accumulated some equity on his/her home and with a favorable real estate market sells the home at a good price and downsizes to a smaller home, keeping the profits and becoming financially free. The profits from the home can be used to pay all debt and grow money on investments via different channels - stock market, real estate, and gold. In this case, what was originally a liability became an asset that provided financial freedom.
Everyone defines financial freedom differently. For some, it means not having to owe any creditors; for others, it means to live a dream lifestyle, and for other people it means to retire early with comfort. It is a matter of perspective and of what your personal goals are - long-term goals as well as short-term ones.
A home can be a great tool in achieving financial freedom when used carefully, as it can also become the opposite - financial ruin, when a person defaults on the loan and goes through a foreclosure. The credit score of that person is ruined and it will take years and a lot of effort to rebuild it. At is best, a home can be the perfect financial tool to make you financially free.