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To Rent or Buy? That is the Question

July 22, 2013

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Article courtesy of Genworth Canada.

 

Most Canadians at some time in their lives have probably asked themselves whether it is better to rent or buy a home.

Purchasing a home is one of 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 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.

Tim

Tim is a mortgage agent in Barrie who specializes in helping first-time home buyers. He works with a variety of lenders and can help customize a mortgage with the best rates & options that fit the needs of each customer.

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Hunting for a Home

February 25, 2013

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Article courtesy of Genworth Canada.

 

Looking for a home can be an intimidating task filled with many questions. What home do I buy and where? Who do I go to for help? And how do I know if I am making a good purchase?

There’s no one “right way” to go about finding a home. But here are a few tips that may make the process a little easier and remove some of the anxiety associated with making what is, for most people, their largest single purchase in life.

The first thing to do is determine how much you can afford [the best way to do that is to contact your favourite mortgage broker!] and what type of home you want or need. This would include the size, number of bedrooms, location and special features such as a garage, fireplace, fence, dishwasher, hot tub etc.

You’ll also want to consider such things as proximity to schools, community centres and play and sports facilities, public transportation, hospitals, libraries and shopping areas and your workplace. These factors are important to you and your family.

Since your home is probably your single largest investment, you’ll want it to be as attractive as possible to purchasers when you’re ready to sell. So keep in mind the features you think will make it attractive to potential buyers in the years ahead.

Finding a REALTOR® to handle your purchase is important. Talk to a few realtors with different companies who know the area where you’re looking to buy. A real estate professional can show you homes in your price range in the areas you like that meet your particular needs and budget.

With so many homes to choose from, how do you know if what you’re going to buy is good value?

It’s very important to inspect the structure and grounds of the home you’re thinking of buying and look around the neighbourhood to be sure it’s an area where you want to live.

Get a copy of the land survey from the seller to check the boundaries of the property to make sure they are clear of encumbrances and walk around the property yourself to make sure there are no surprises.

You’ll also want to tour the neighbourhood and see the house at different times of the day or on weekends to check traffic patterns and noise levels that could affect your decision to buy.

When you find a home you like, inspect it yourself carefully for such things as structural defects, signs of water damage, lack of water pressure, faulty plumbing or inadequate wiring.

You may want to get an inspection done by a professional home inspector before you buy. A professional may uncover problems that you wouldn’t notice.

A good inspector will check the house from the basement to the roof, including the heating and cooling systems, plumbing, walls, ceilings, insulation, electrical wiring, foundation, ventilation, doors and windows, and septic and sewer systems.

An inspector will determine if any repairs are necessary. If possible, plan to go along with the inspector during his inspection. You could pick up some valuable information that will help you in the future with the maintenance of your house. Your real estate agency can likely refer an inspector if you don’t know of one yourself.

Some careful planning can help to ensure that you get a good-quality house that will meet the needs of you and your family in an area you like for a price you can afford without any nasty surprises after you take possession.

Tim

Tim is a mortgage agent in Barrie who specializes in helping first-time home buyers. He works with a variety of lenders and can help customize a mortgage with the best rates & options that fit the needs of each customer.

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