You’ve no doubt heard that piece of that says, “There’s no place like home,” but is owning a home really that big of a deal? In a word, yes. Aside from pride of ownership, there are several great financial reasons to trade in your rent cheque for a down payment.
You’ve no doubt heard that piece of Hollywood movie wisdom that says, “There’s no place like home,” but is owning a home really that big of a deal? In a word, yes. Aside from pride of ownership, there are several great financial reasons to trade in your rent cheque for a down payment.
You are investing in your future
It’s no secret that when you rent a home, you come out at the end of your lease agreement term with nothing to show for the money you have been paying every month. When you purchase a home, by contrast, you are investing in something that will be yours. Not only that, it will help you to gradually build up wealth over time. Rather than lining your landlord’s pockets, you are putting your money toward an investment that is all yours.
You build up equity
As already mentioned, when you rent a home you are putting money into someone else’s pocket. By contrast, when you own your home you build up equity in that home. What does that mean? Equity refers to the amount of money you can sell the home for less the amount you still owe on it. When you make a mortgage payment, a portion of that amount reduces the amount you owe on your home and, at the same time, raises the equity. The amount that goes toward the principle on your loan is lowest on your first mortgage payment and grows with every payment until the house is paid off, with the last payment having the largest percentage going toward the principle. Therefore, as you continue to pay your mortgage your equity grows.
Homeownership has tax benefits, too. The interest you pay on your mortgage can, in some cases, serve as a deduction on your taxes. This can be a significant deduction, especially in the early years of owning a home, because it is during those years that your mortgage payments will be mostly interest.
As a note, you may also be able to deduct things like closings costs the first year you buy your home and also property tax.
Capital gains exclusions
When you sell your primary residence (that is, the house in which you live the majority of the time) you can keep a certain amount of the profit from the sale (which varies depending on whether you are single or married) without having to pay any capital gains taxes. That could mean a significant amount of money stays in your pocket when you sell your home at a profit.
Built-in opportunities to save
In some ways, having a mortgage is akin to having a forced savings plan. As you pay off your mortgage each month, you are building up equity in your home. Put another way, you are building up equity, which is basically like putting money into a savings account for another day.
You’ll actually save money
Many people start off their adult lives by renting a home, thinking that it is the economical choice. Although it’s true that in the short term renting is cheaper (you don’t need a down payment, for example) you’ll actually save money in the long term by owning your home. As the interest portion of your mortgage decreases over time, the interest you are paying will actually be lower than most rent payments. So, by owning your home you’ll actually save money over renting.
As you can see, there are many reasons to purchase your own home. To find one that is right for you in Ontario, Canada, contact a real estate agent such as mycozyhomes.com.