With the current heated real estate
MYLENE LIM market , a lot
Licensed Mortgage Specialist of Canadians are asking themselves whether it ’ s better to rent or buy a home . Is it worth paying the ever-increasing monthly rental with no security on how long you could continue living in your rented home ? Isn ’ t it better to use the money on a monthly mortgage payment on a property that is yours ? Is there a market bubble in real estate that may affect your property ’ s future value ?
Ultimately , this will be a personal decision depending on what you ’ re most comfortable with . To help you determine this , here are some pros and cons of home ownership vs . renting HOMEOWNERSHIP Advantages : Owning a home is considered a long-term sound investment . As long as the market is stable or in an upswing , the mortgage payment that you do every month helps in increasing the equity of your property . Some property owners look at the mortgage payments as “ forced savings ” with the end result of getting more value on your investment than had you used this money for something else .
During the early years of your mortgage payments , a bigger portion of your monthly payment may go towards the interest of your loan but as your principal loan becomes smaller , the interest portion of
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your payment will proportionately decrease . Most mortgage lenders also give you an option to pay a lump sum amount every year ( normally up to a maximum of 15 % or 20 % of your principal loan ) or double up on your monthly payment . This would drastically shorten your amortization period and thereby you will get to fully own your home faster .
Another advantage of owning your home as your principal residence is that should you decide to sell the property , you are except from paying capital gains on the equity of your property .
There are a lot of homeowners who may not have access to a big down payment start with a smaller property and build up on the equity of that property . After a few years , they sell or refinance the property and use the equity they have gained to use as a down payment for a bigger property or re-invest on a second property . Waiting for the time when you will have saved enough down payment money for your dream home may not come . Property values have gone up faster than increases in income . Most probably , you would not be able to afford the property you could have bought a year ago with your income .
You will also have a sense of pride of being a homeowner as oppose to being a renter . You will be able to decorate your own property based on your personal style , within strata guidelines if applicable . Disadvantages : Home ownership is generally the
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biggest investment you can own in your lifetime . With it come big responsibilities . If you have a mortgage on your home just like majority of homeowners , you are obligated to a monthly mortgage payment without fail . There is no getting around this . You will have to take this obligation into account when you review your financial situation and plan around this .
Aside from monthly mortgage payment , you will have to consider the annual property tax , monthly strata payment if applicable , repair and maintenance , water and heating bills , etc .
You will also need to take into account that you will be less flexible in relocating to another area if better opportunities arise . RENTING Advantage : The main advantage of renting is you are not indebted to a monthly mortgage payment . You have the flexibility to adjust your housing cost based on what you can afford at any time . You will also have the ability to
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relocate to another area if you prefer . Disadvantage : Your rental payment is an expense . You will not be able to see that rental money back .
As a renter , you won ’ t have the security of being able to stay in your rented property forever . You may find yourself looking for another rental property once the landlord gives you the required two months ’ notice to vacate . And in this heated real estate market , there are renters who have had to transfer a few times in the last few years .
Another negative factor in renting is that the rental properties are getting more expensive . Sometimes more expensive than paying for mortgage .
Borrowers should discuss with a licensed mortgage broker the different options available for their particular situation so they could make educated decisions based on their unique needs . In most cases , it doesn ’ t cost borrowers anything to discuss , review and arrange their mortgage with a licensed mortgage broker so take advantage of this opportunity .
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