Financial Counseling Certification Program (FiCEP) Practice Exam

Which statement accurately reflects the benefit of property ownership?

1. Owning property generally leads to a decrease in equity

2. Owning property generally builds property equity

3. Renting is always more beneficial than owning

4. Equity in owned properties does not typically increase over time

The correct answer is: Owning property generally builds property equity

The statement that owning property generally builds property equity accurately highlights one of the key financial benefits of property ownership. When an individual purchases a property, they are investing in an asset that has the potential to appreciate in value over time. As mortgage payments are made and property values increase, the owner’s equity—the difference between the property's market value and the amount owed on the mortgage—typically rises. This accumulation of equity can serve multiple purposes: it can provide the homeowner with access to funds through refinancing, contribute to overall wealth, and potentially be tapped into for future investments or expenses. Over time, as property values increase and remaining mortgage balances decrease, home equity can significantly enhance a property owner's financial standing. Understanding this concept is crucial for anyone considering real estate investments or homeownership, as it underscores the long-term value and potential financial security that owning property can provide.