Are you still renting a home or apartment for yourself or your family? If so, you’re losing money.
These are just three ways you’re losing money by renting instead of owning a home.
1. You’re paying for someone else’s mortgage payment. By doing this, you’re missing out on the appreciation that the property gives to the landlord. “Appreciation” is a term used in accounting relating to the increase in the value of an asset — which in real estate terms means added value to the property. Over the last five years, houses have appreciated significantly, resulting in many new real estate investor multimillionaires.
2. Renters don’t get to freeze their monthly housing expenses as much as homebuyers can. In saying that, many homebuyers get mortgage payments with adjustable interest rates, which inevitably increases their fees over time. However, these payments won’t grow as much over the long term as the renting price will. Just think about how much an apartment costs today compared to ten years ago. A two bedroom apartment in Toronto, Canada leases for $2,500 today. The same apartment rented for $1,400 in 2009 when it was brand new. Homebuyers who had low monthly payments in 2009 and didn’t refinance their mortgage are now enjoying low, affordable fees, without worrying about rising rental prices.
3. Renters don’t benefit from tax advantages, but homeowners get income tax deductions. Tax deductions like interest costs, for instance, will amount to thousands of dollars of savings. The confidence and satisfaction garnered with buying a home stem from knowing that you could have lost out on making money with real estate while renting. Renters don’t get the same satisfaction of home enjoyment that home buyers do. Many landlords won’t allow any aesthetic changes to your home without prior approval and discussion. Also, you won’t feel like fixing up the property with custom products because you get little say in the house materials used. This stops you, the renter, from making your statement. You won’t feel as “at home” as much as the person who actually owns the home and feels emotionally connected to their property.
So How Do I Buy My First Home?
The most significant barrier to entry in real estate ownership is accumulating enough money for a down payment; for some, at least 20% of the purchase price to not be stress tested. This high number is why people think they have to have thousands of dollars for a down payment. However, if you have good credit and a decent job, you can get a mortgage for a home with zero down. With today’s mortgage finance plans, you may be surprised to find out how much of a home you can afford with payments similar to what you currently pay in rent. You may have to go out of the significant GTA areas to buy a home, but that’s why so many people commute in Toronto. Affordable housing costs much less in outlying areas. However, so do the rents. If you’re renting an apartment for $2,300 in Toronto, you could buy a $500,000 home in Caledon, Ontario. If these prices sound high to you, check your local area. Perhaps your monthly rent is only $1,000, and houses cost less than $200,000. Talk to a mortgage loan officer and see how much of a home you can afford. If you’re renting, make it a priority to move up to buying your own home instead.