Even if buying a home was undoubtedly considered a smart financial decision since forever, we have recently seen certain bloggers and economic experts push forward the idea of eternal renting as the right thing to do. Nevertheless, buying a home is still one of the smartest financial decisions an individual can make, despite the ongoing renting trends.
Instead of paying your landlord’s mortgage, you could start paying off your own after you invest in a house you can afford. According to those who advocate against home ownership, taxes and things like maintenance, interest on down payment, insurance, etc. can drain your budget very quickly. That might be true, but looking long-term, your costs will decrease with time. There are different rebates you can apply for (besides the first-time buyer tax benefits) which will ease the mortgage loan process.Owning a home in Southeast Calgary is still affordable, and that’s why the majority of residents prefer buying over renting.
Building equity
Home equity represents the part of the home you have paid off so far. This means if you bought a $300,000 home, and you paid off $120,000, that amount represents your equity, and you have $180,000 more to go.
Buying a home means more freedom as you have the right to manage the property the way you want, e.g., rebuild, remodel, sublet it, etc., without having to consult anyone. If it’s big enough, you can become a landlord yourself by converting a part to a rental unit. Mostly, people turn their basement into a rental.
Rent increases with time
Renting means depending on the mood of the landlord and being under the constant pressure of a rent increase. While rent control differs from province to province, in Alberta, there is no specified limit to how high the rent can go, but at least, the landlord cannot increase the rent more than once a year for the same tenant.
When it comes to the mortgage, it only increases when the interest rate goes up and only upon mortgage renewal, provided you opted for a fixed rate. For example, the latest interest rate increase in Canada will affect fixed-rate mortgage borrowers only after their current mortgage expires.
Despite the recent increase, isn’t it still better to pay off your own equity than giving someone else the money? On the other hand, if you’d decide to sell the house in 20 years or so, you’d probably get the double as properties appreciate over time. The 2007 housing bubble in the USA has shaken up the market, and many are afraid of a depreciation again, but the fact is that it was a rare event and that you can count on a more or less normal market in the next 20 years.
When you buy a house, you can look forward to building your equity by reducing your debt, and subsequently, your overall costs, but when you are a renter, your costs will probably increase with time. Renting is only the better option when you are not sure you want to stay in a home for 15+ years. If you see yourself moving every several years, then, renting is probably more your thing.
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