Buying Versus Renting
With today's low interest rates, mortgage payments are often less than monthly rent payments, making home ownership more attractive than ever. Instead of using your hard-earned cash to pay the landlord's mortgage, you can use the rent money to buy a home of your own.
Buying a home makes sound financial sense but the benefits extend much farther. Here are some facts to consider when you start wondering why buying is better than renting.
- If you are 35 now and just buying your first home, you'll be mortgage-free when you are 60 and sitting comfortably on a considerable asset base. It could mean financial independence as a senior and the opportunity to enjoy your golden years.
- It's highly likely your investment will appreciate considerably in 25 years. Don't buy now with the intention of making a quick fortune, though; think of home-buying as a sound, long-term investment.
- Buying a house is a very effective way of saving regularly for 25 years. Even if you never buy into another retirement savings or investment plan, you are effectively putting money away for the future when you buy a home.
- Owning a home of your own means you can set down roots, get to know your community and involve yourself in it. Kids can make friends in the neighbourhood, many of whom will probably go to the same school and be involved in similar recreational groups.
- Discover the pride of home ownership. You can fix up the place to suit your particular needs. Knock out that cupboard under the stairs. Put a darkroom or woodworking room in your basement. Try those fancy paints or finishes. Put murals on the wall. Build a deck. Create the kitchen you've always dreamed of. You can enjoy the touches you put into your home for as long as you want, and then you can change them again.
- Mortgage insurance that pays off the balance of the principal when a homeowner dies means your family would be left with a home - and without debt.
- As your family grows and moves on to homes of their own, you have the option of earning extra income by renting out spare rooms or floors.
- If you are planning to borrow money from a bank or other financial institution, owning your own home is a definite plus when it comes time to negotiate.
- If you pay $750 a month for a rental unit and never face a rent increase, after 25 years you will have paid a total of $225,000 - and have nothing to show for it. If, like most people, you face an annual rent increase of, say, five per cent, you will have paid out $430,000 to a landlord.
- You may not need as much money as you think to get into the home market. Qualified buyers can buy a house with as little as five per cent down these days through the Canada Mortgage and Housing Corporation (CMHC) mortgage insurance plan. A similar plan is available through GE Capital Mortgage Insurance Co.
- With many kinds of investments, you have to pay a capital gains tax on money you make. You don't have to pay that tax when the value of your house goes up. This means you can keep more of the money your investment earns.
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