Is Buying a House Worth It?
(Six-minute read time)
If you're a first-time buyer or are looking at buying a new home, you may be feeling a sense of hesitation or stress over the process. There has been a lot of news regarding housing markets and the uncertainty that the last few years have brought. The decision is truly yours if you want to buy or continue renting if you are currently doing so, but there are several benefits to buying that renting doesn't offer.
To help you better understand why buying can be more advantageous to you in the long run, let's take a look at the costs related to buying a home and the benefits that come along with homeownership.
Contact the Professionals at WealthTrack Today
Learn more about what our team can do to help you get your next dream home.
Costs Associated with Buying a Home
Buying and maintaining a home is an expensive process, and there may be some associated costs that you may not be aware of if it's your first time buying. However, owning a home is one of the best investments you can make. Here is a breakdown of the costs of buying a home and other expenses that may be involved.
Upfront Costs When Buying A House
The most significant sum of money related to the upfront costs of buying a home is your down payment. Down payments differ based on the purchase price of the house. The higher the home price, the larger the down payment will need to be. For homes valued at $500,000 or less, you will need to have a down payment of 5%. You'll also have to pay the realtor and lawyer fees that are associated with the purchase of the home (and the closing of your existing home if you're moving from one property to another). Depending on where you live, you'll also want to budget for land transfer tax and other taxes on the sale and purchase.
To learn more about mortgage costs, read our article: How Much Does a Mortgage Cost in Ontario?
Mortgage Default Insurance
If you don't have more than 20% of the cost of your home to use for a down payment, you will be required to buy mortgage default insurance. This protects your lenders if you fail to make your prearranged mortgage payments. The insurance can be paid in one lump sum or added to the cost of your mortgage.
As of the writing of this article, here is a breakdown of the mortgage default insurance costs. In Ontario, this insurance is subject to Provincial Sales Tax. The amount of the tax must be paid at closing - it cannot be added to the mortgage.
Loan To Value % | Mortgage Default Insurance Premium
Up to 85% | 2.8% of the mortgage amount
Up to 90% | 3.1% of the mortgage amount
Up to 95% | 4.0% of the mortgage amount
Moving Costs
If you don't have friends or family who can help you move, you will need to hire a moving company. The costs associated with this can vary depending on how much stuff you have, how far you are travelling, and if large items are being moved, such as refrigerators, stoves, and laundry machines.
Upgrades
If you're buying a brand-new or newer house, there may not be too many upgrades that you want to make. But if you're buying an older home, there may be various things you want to change or upgrade before getting settled. Depending on what you plan on doing to the house, you could spend anywhere from a few hundred to thousands of dollars.
Utility Costs
Not all, but some utility companies charge you when you change your address or when setting up new services. Gas, hydro, electricity, cable, and internet are examples of these services. It may not be a lot, but keep this in mind when you budget for your overall moving costs.
Looking at all of these costs related to moving can seem intimidating, but you have to remember that you're investing in your future, and homeownership is one of the best investments you can make. Renting is much more affordable, but you're helping to pay another person's mortgage off instead of having your own, which can be a huge disadvantage for renters.
Now that we've looked at the costs of buying a home let's consider all the benefits of owning your own home.
Timing Is Everything
Discover the eight reasons why right now may not be the best time for you to buy a home.
Benefits of Buying a Home
In addition to being able to build equity that can help you financially in the future, there are also plenty of non-monetary advantages associated with homeownership. If you're a first-time buyer, there are plenty of incentives to buying a home that can help tip the scales if you're still uncertain about it.
Financial Benefits of Owning a Home
Tax benefits – The Canadian government offers various tax breaks, benefits, and credits to all homebuyers and especially to first-time buyers.
Equity – Every time you make a mortgage payment, you get one step closer to owning the home outright. You also gain equity in your home that can be used for renovations, consolidating debts, or other events where a large sum of money is needed.
Power of leverage – Buying a home helps build wealth and boost returns on your initial investment. Capital gains exemption – Canada's tax system can be generous to homeowners and buyers. If you sell a property that qualifies and your gains are a little over $800,000, you may be completely exempt from taxes.
Non-Financial Benefits of Owning a Home
Stability – When you rent a home, you are at the owners' will. If they choose to sell or move in themselves, you will have to find somewhere else to live. Buying a home offers a stable living environment for you and your family.
Pride of ownership – Owning a home can offer a sense of accomplishment and pride. It's a symbol of all of your hard work. You can feel satisfied knowing you've given yourself and your family a stable and happy place to call home.
Can make it your own – Most rental units don't allow you to make any significant changes to space. Unless otherwise specified, you will have to ask to add a different coat of paint to the space. With a home, you can alter it any way you want to make it your own.
Privacy – Living in an apartment doesn't allow for much privacy. You're surrounded by neighbours all of the time. Owning a home grants you the privacy that we all want and need.
Sense of community – Homeowners typically spend more time in a space than people who rent. This extended time somewhere allows you the chance to get to know your neighbours and build a true sense of community.
Compare the costs of renting versus owning with our Rent vs Buy Calculator
Think of the Long-term Benefits
To sum it up, buying a home can be an expensive and stressful time, but not if you think about the long-term financial and non-financial advantages that come with homeownership. To make the whole process go a lot smoother you need to have the right people with the proper knowledge on your side. Contact the dedicated professionals at WealthTrack and take a positive look at building your financial future through home ownership.
FAQ: Is Buying a House Worth It?
-
When buying a home, you need to consider several costs, including the down payment, realtor and lawyer fees, land transfer taxes, and mortgage default insurance if applicable. There are also additional costs like moving expenses, potential upgrades, and utility setup fees.
-
Mortgage default insurance is required if you have less than a 20% down payment. It protects lenders in case you fail to make mortgage payments. The cost varies based on the loan-to-value ratio and is either paid upfront or added to your mortgage.
-
Every mortgage payment you make reduces your loan balance, increasing your equity. Over time, this equity can be used for renovations, debt consolidation, or as a financial resource for other needs.
-
Owning a home provides stability, pride of ownership, and the ability to customize your living space. It also offers privacy and the opportunity to build a sense of community with neighbors.
-
Homeownership offers stability because you are not subject to a landlord's decisions, such as selling the property. This means you can create a long-term living environment for your family without the fear of being asked to move.
-
Buying a home is often seen as a good investment because its value can increase over time, giving you potential financial gains. Additionally, owning a home allows you to build equity that can be used to support other financial opportunities.
-
Consider your long-term financial goals, stability needs, and whether you want the freedom to customize your living space. Renting may offer more flexibility, but buying provides investment potential and stability.
Recognized By
Interested in Learning More About Mortgages?
Check out our additional resources:
