To Rent Or Not To Rent
With interest rates as low as they are, it may be a good time to evaluate your current situation and decide if it is better to continue renting and paying off your landlord's mortgage, or if it is the right time for you to take the plunge into home ownership. If you have fainted at the very idea of buying a home, read on to discover the pros and cons of first time home buyer loans and becoming a homeowner.
The Upside of First Time Home Buyer Loans and Ownership
When you rent, the money you spend each month is lost forever. When you own your home, every payment you make is an investment into your future, rather than your landlord's. Equity is considered a financial asset and simply put, it is the difference between the value of your new home and the amount owing on your mortgage. The best part is, part of your mortgage payment always goes towards reducing your principal mortgage amount, which increases your equity. In the early stages of first time home buyer loans, the portion applied to the principal is relatively low, but it increases with every year spent in the home.
Another upside is you can decorate or improve it any way you wish. While this is a great freeing experience, it can also help you build equity faster. Whenever home improvements are made, if the work is done well and increases the value of your home, you are potentially increasing your financial worth. If building equity to upgrade to a larger home is your goal, be sure to seek advice so you don't overdo the renovations and spend too much for too little return.
The best way to go about home ownership the first time so you can easily afford it is to start small, but dream big. Make sure the payments are comfortable and build up equity so you can upgrade in the future. It's worth mentioning that if it's your primary residence, when you sell the home, any profit you make is tax-free and can be invested into a home that is closer to your dream home or used any way you wish.
The Downside to Home Ownership
Home ownership can be expensive and limit your lifestyle somewhat. You need to make sure you can afford not only your mortgage, but property taxes, insurance and maintenance costs as well. You can't just call up the landlord if the furnace breaks down. Also, a home ties you to an area so if you have to change jobs, you may have to make some sacrifices like a longer commute or limiting your search area. Finally, you cannot bank on your home being an instant investment. While it's usually a stable investment for the long term, in the short term you can lose money if you have to sell for any reason.
To rent, or not to rent? It’s a big question that needs time to consider and answer. At Dominion Lending Centres, our experienced mortgage brokers can help you on your journey to purchase your first home. Contact us and let’s chat to see if a first time home buyer loan is the right choice for you.Request Mortgage Info