My mother had no significant savings, investments or anything worthwhile other than her home. I wanted to share her only important assets with her three children, me, my brother and my sister. And when she passed away, she made it happen: we took over her home. And so she laid the foundation for generations of wealth.
Almost every parent wants the ability to bequeath them something that enriches them. For many families, legacy often starts with homeownership.
“Maintainment is usually one of the biggest assets owned by the average person,” says Maxine Thiel, licensed real estate agent at Keller Williams Realty, based in the Bronx of New York. “And these large assets that we evaluate over time usually bring about huge returns, which, if used correctly, can have a positive impact on the wealth of the next generation.”
In other words, your residence can be an important financial resource for your family. Buying and maintaining a home builds equity (ownership) stock that can be communicated to the heirs. That’s especially important when record-high home prices and rising mortgage rates allow homeownership to feel like an elusive dream.
Why and how can home equity be the basis for the wealth of your family’s generation?
Why is home equity important?
Home equity is a part of your property that you actually own entirely. This deducts outstanding mortgage obligations, excluding the current market value of the place of residence.
When you borrow to buy a home, your first stock equals your down payment, the amount you donated directly to the purchase rather than to raise funds. Over time, your household will increase in two major ways, due to a decrease in mortgage debt and an increase in property value.
“Your equity will increase as your capital increases as your mortgage payments reduce your mortgage balance and increases due to factors such as improved homes, strengthening neighbourhoods, and overall real estate market trends.” “The fairness of your homeownership is important because it’s not just a theoretical person. It leads to actual financial possibilities, which are assets borrowed or sold against profits.”
You can tap your home equity in a variety of ways, in the form of a home equity loan, a home equity line credit line, or a cash-out refinance on your primary mortgage. Often, it’s at better interest rates than personal loans. Your capital will earn you a decent profit when it’s time to sell your home.
Home equity is “often a major source of wealth for many homeowners,” adds Dunbar. And for their descendants – if property (or proceeds from property) remains in the homeowner’s real estate.
How can buying a home help you build wealth?
Generational wealth refers to assets that are passed down from one generation’s family to the next generation. It can take any form, including financial investments, savings accounts, tangible products, real estate, and more.
“We’ve been working hard to get into the business,” said Robert Johnson, professor of finance at Haider College of Business at Clayton University. “First of all, homeowners need to make regular mortgage payments, thereby reducing their mortgage balances, and homeowners must resist the temptation to borrow against the equity of their accumulated homes, if possible.”
The step-by-step way home equity arises makes it an ideal vehicle that builds long-term wealth. “Monthly mortgage payments are often considered forced savings accounts,” as Lawrence Yun, chief economist at the National Association of Realtors (NAR) once characterized it. Additionally, properties tend to be grateful over time. The housing market has its ups and downs, but “it’s very rare to see real estate value at zero,” says Steven Orlowkski, founder/CEO of Orlowski Financial, a New Jersey financial services company.
“Because real estate has the rest of your value unless you do something unimaginably stupid. “If you do it right, you’ll invest in the right area and try to enter a place of growth, and then you can have concrete assets that can be handed over to consecutive generations.”
How can homeownership help younger generations build wealth?
There are several economic benefits to inheriting a home, offering a variety of options, and, especially as bankrate housing affordability research has found, a six-figure income proposition, especially in the recent times when buying a home is becoming increasingly expensive, the younger generation is a valuable responsibility.
Naturally, 83% of US adults who don’t own a home but want to cite affordable prices as a reason to keep them affordable are 83% of US adults. Being able to earn enough (59%), home prices are too high (55%), or not being able to afford down payments and closing costs (46%) are certain factors they cite. Gen Xers (ages 45-60) are the most likely age group that says too much debt is preventing them from buying a home.
So, “not only will you give appreciation property, but you will not only protect your heirs from the escalating costs of homeownership in the dynamic real estate market, but you will also be a gift for your home,” says Dunbar.
Passing home equity can also improve intergenerational bonds. The love of the old family’s home and the gratitude to his predecessors made to acquire and maintain it.
Building Home Equity in 2025
Over the past five years, homeowners in America have seen a huge surge in home prices and value, bringing record-breaking home equity.
According to ICE Mortgage Technology, which enters 2025, homeowners holding mortgages recorded the largest shares in any year on record. That averages $203,000 per homeowner.
“The amount of stock available for withdrawal continues to increase and remains a restriction of withdrawals compared to historic levels, but the combination of market trends, including expectations for low interest rates and competitive HELOC pricing, provides an environment for withdrawal activities in the coming quarter.
With the high cost of mortgages and homeownership, many prospects are waiting for things in the hopes of lower home prices and interest rates. However, there is a risk of postponing your purchase. However, it could be a new normal, not only is it intensified costs.
“That could mean missing out on potential home equity growth,” says Sean Marcou, who manages brokers on an X2 mortgage in Chandler, Arizona. “Despite the current market situation, homeownership is almost always a valuable way to build wealth over time. You can start building wealth quickly enough to get into the homeownership game.”
Dunbar agrees. “Delays can mean facing more steeper home prices, which means stalling the benefits of homeownership and the potential for wealth accumulation that could benefit future generations,” he says.
How to pass properties
There are various ways to transfer your home and its fairness to your chosen heirs. The most common options are:
The challenge of handing over real estate
Johnson warns that buying residential property and building home equity does not necessarily guarantee the foundation of family property. “I think there are better ways to build generational wealth. Specifically, we invest in a diverse stock portfolio,” he says.
Certainly passing properties can be problematic. “One of the major issues is potential real estate or inheritance taxes that arise based on the property’s valuation,” says Dunbar. Of course, that may apply to any asset, but “and “And more, unresolved liens and mortgages on property can further complicate the delivery process.” Successing a home with a mortgage can be particularly burdensome for the heirs if they are not in a position to assume the debt. “In addition, older properties may require substantial maintenance or renovations, which adds additional challenges to the successor,” he notes.
Next is the issue of liquidity. Home equity wealth cannot be easily shared or split in a way that allows multiple owners, cash or stocks.
“How do you know what you want from this property?” asks Kenneth Chavis IV, a senior wealth counselor at Versant Capital Management, an Arizona-based wealth management company. “Maybe one or two of us want to keep it up. Maybe one or two of us want to sell it for a variety of reasons. It could lead to some disputes and challenges. If they don’t agree with friendly terms, you’ll potentially need to go through legal proceedings.” Of course, “many of which can be mitigated with a proper real estate plan.”
Home Equity and Generation Wealth Conclusion
“Estate is one of the pillars of wealth,” Teele says. “It’s appreciation over time, and viewing is an asset that comes with the home, not the owner. So, when the assets that represent your home are passed on from generation to generation, home equity is now theirs.”
Time is the essence. “If you buy a house and extend your budget to a certain point of financial stress, that may not be the right move,” says Marcou. “However, potential homeowners need to understand that the longer they own a home, the more affordable they should be and the faster the home’s fairness.”
Of course, there is no perfect investment. The illiquidity of a home can make it a hassle for inheritance. Still, “the enduring value of real estate and the track record of homes that we appreciate over time make it a powerful tool for wealth creation,” says Dunbar. “By building capital and leveraging the financial perks of property owned, we can establish a solid foundation for long-term prosperity.”
And for me, everything goes smoothly. My sister and my two nephews already lived in a house we inherited from our mother. My brother and I agreed to continue the arrangement. There is no need or plan to sell the place right away. But for all of us, it’s not just about acquiring valuable assets. It is to honor our legacy from her.
Additional Reports by Erik J. Martin
