OWN IT: 10 REASONS TO BUY A HOME AND HOW YOU CAN
YES! YOU CAN!
With house prices reaching new heights every month, many are starting to question whether owning a home is right for them. This article will go over 10 reasons you absolutely should OWN your own home, and more importantly, steps you can take to start working towards that goal.
First off – yes, house prices are at significant heights, and affordability is a valid concern for many. However, keep in mind that interest rates are also at ALL-TIME lows. A mortgage in 1981 for an average house in Toronto ($91K median price), would cost approximately $1,100/month. When factoring in construction price inflation, this works out to $4,800/month in 2021 dollars. Comparatively, in 2021 an average price in Toronto cost about $1.1M – while a mortgage with a similar amortization period (and the same 20% down-payment), costs about $5,000/month – roughly a 4% difference to the 1981 price when adjusting for inflation. What does this say? To me, this says that there is NO BUBBLE – are houses in demand, yes, but the inherent value of owning a home is costing roughly the same as it did 40 years ago, when we factor in base inflation (cost of living). To understand what drives this value, we will go through the advantages of buying over renting. And if you are saying “So what – I will never be able to buy a home anyways” - We will touch on what steps you can take to enter the world of home ownership at the end of the article.
Reasons to own a home (in no particular order)
1. Wealth building - Why pay another person’s mortgage? If you have to pay $2,500 a month or more, why not get something for it, rather than having it go elsewhere!
2. Build Equity and Value – Who doesn’t like earning twice with one cheque? When you own your own home, not only are you building equity as you pay down debt (the principal), but historical trends have shown that house prices go up consistently, year after year – which gives you more earnings (and TAX FREE as well if it’s your principal residence!)
3. Secondary income - Rent a portion out, mortgage interest typically is tax deductible. When renting, you can only sublet which typically isn’t much of a win but more of a break-even, and has many constraints. When you own the home, you can rent out a portion to help offset the mortgage cost, and also split utilities costs etc. As a bonus, you can typically claim a portion of the interest as a tax deduction!
4. Stability and Security - You sell when you want, no risk of eviction when ownership changes, as you are the owner! You also control the payments as you can negotiate your mortgage, not be forced by a Landlord to pay a certain amount, or be forced to move.
5. Instill greater sense of responsibility in your children – Who doesn’t remember having household chores when you were young? Not much fun at the time…but so many life lessons!
6. Freedom to renovate, have pets etc – Who doesn’t want to have their own say in what they do with the place they spend the most time in!
7. Helps You Build Cash flow - teaches you the discipline to save for downpayment, if you can save for a downpayment and know that discipline, you can carry a mortgage, or save for whatever else you want!
8. Stronger sense of community – Pride of Ownership is REAL. Who doesn’t love having a place to call to their own?
9. Better Quality of Life - work your way to a better home, better neighbourhood – Let’s face it, you probably can’t start off in the home of your dreams, but as you build equity (paying down debt, and increasing the home’s value), you can look to trade up to new homes.
10. Leave an Inheritance and Legacy – It may not be the Dutton Ranch like we see on “Yellowstone”, but lets face it, a large amount of wealth is tied up in your retirement home. Why not leave a legacy for your family to pass on from generation to generation!
By now, I hope you see that there are numerous reasons to own a home. Yes, it is difficult and, likely the largest purchase you will ever make – but it will be worth it in the long run. Future posts will delve into these steps in more detail, but in general, the following should be taken to get in and STAY in your first home!
1. Clear ALL debt – this will only hurt you and limit your capacity when you want to buy a home – Get RID of it!
2. Build an Emergency Fund of 3 to 6 months expenses – when you do “pull the trigger” and get into your first home – be ready for a year of surprises! Have a little cushion to be ready and then enjoy the ride, rather than fretting each step of the way!
3. Save up for a downpayment – ideally 20% (reduces your cost by not having to insure your mortgage), but at least 10% so that your equity is protected if the unexpected happens
4. Build your Network! Get a trusted Realtor and Mortgage Broker. It costs you NOTHING and gives you an inside track on what the home you are looking at is truly worth, where to look, and mortgage products and rates you can get that work best for YOU! You’d be crazy not to! If you aren’t sure where to start, speak to us – we have a network we work with!
If you want to learn more about home ownership, and specifically, how you can get into a home – come to our FREE webinar on Wednesday April 20th, at 7:00pm. Register by pasting the following in your browser: https://bit.ly/3iq8IpL. If you’d like to jump right in and start on your path to homeownership now, you can book a FREE, no obligation consultation, on our website (www.hopefinancialsolutions.ca/get-started).
We look forward to helping you on your journey to financial freedom!
