As a new immigrant, sooner rather than later you will be faced with the question: Is it better to rent or buy a home?
Purchasing a home is one the biggest decisions most people ever make in
their lives. Ultimately, it is a personal choice. But it helps to look
at the pros and cons of buying to determine whether home ownership is
right for you.
Some Advantages of Buying a Home: Owning a home is generally
considered to be a sound, long-term investment that can provide
satisfaction and security for you and your family.
A recent survey by real estate company, Re/Max, found that house prices
in Canada have appreciated by 53.7 per cent over the last decade, or
more than five per cent a year. Prices skyrocketed most dramatically in
Montreal (85.9 per cent), Calgary (81.7 per cent) and Halifax (77.3 per
cent).
Each month when you make your mortgage payment, you are building equity
in your home. Equity is the portion of the property that you actually
build through your monthly payment versus the portion that you still
owe the lender.
At the beginning of your mortgage, more of your payments go toward
paying off the interest and less toward paying off the principal.
However, the longer you stay in your home and the more mortgage
payments you make, the more principal you pay off and the more equity
you accumulate. Most mortgages also offer you the option of making
additional monthly or annual payments to reduce your principal faster.
There is also a tax advantage. If your home is your principal
residence, any profit you make when you sell it is tax-free. A home can
appreciate, or increase in value as time passes, building more equity.
As you build up equity, it's usually easier to afford another more
expensive home in the future thanks to the profit you'll make when
selling your current home.
As an owner, you can also decorate and improve your home any way you
like. Ownership tends to give you a sense of pride and can give you and
your family stronger ties to the community.
If you do decide that home ownership is right for you, it's important
to choose a home you can afford. If you can't afford to buy your dream
home, purchasing a more modest home can be a great place to start
building equity that one day may allow you to buy the home of your
dreams.
Some Disadvantages of Buying a Home: It's easy to get caught up
in the excitement of buying a home. So it's important to remember that
home ownership has some additional responsibilities as well.
For one thing, a home can be expensive. Chances are, your mortgage
payments will be more than what you are currently paying in rent. There
are also added costs of property taxes, home repairs and maintenance.
Owning a home ties up some of your cash and is likely to reduce your
flexibility to move to a new location or change jobs. While your home
might increase in value as time goes by, don't expect to get a big
return quickly.
There are no guarantees that your home will increase in value,
particularly during the first few years. In the beginning, you could
actually lose money if you sell because your home may not have
appreciated enough to cover the real estate fees and moving, renovation
and other costs. Real estate is usually considered a good investment
over the long term, however.
When making the decision about whether or not to buy, it's important to
carefully choose a home you can afford, and then weigh the pros and
cons.
Millions of people enjoy the rewards of home ownership. But ultimately
it is a personal decision based on your personal priorities.
Source: News Canada. More information on home ownership is available at the Genworth Financial Canada website at genworth.ca.
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