Buying a Home versus Renting – By the Barrie Home Inspector

There are many reasons why individuals choose to rent a home.  The biggest reason is the upfront costs of purchasing a home.  These costs include, making a down payment, home inspection fee, closing costs, home insurance, legal fees and moving expenses.  Some people have uncertainty in their career or ability to earn a wage.

Buying a home allows people to start building equity and gives them the freedom to decorate or modify their home as they see fit.  Pride of home ownership and the ability to perform your own maintenance is a big plus for most people.  An article in the New York Times claims the average home owner would actually save over $10,000.00 over a 6 year period compared to renting the same house.

With today’s low interest rates many first time home owners are jumping into the market.  Many renters don’t realize they have the means to purchase their own home or the benefits of homeownership as compared to renting.

Over the last ten years, the cost of rental housing in North America has increased an average of 3.5% per year. If that trend continues, that means that an apartment or home renting for $1,000 per month will cost more than $1,300 a month in ten years. If you rent the same home for ten years, the total amount you would pay for rent will equal $140,777!

Mortgage interest deductions, mortgage principal accumulation, property tax deductions, and home appreciation are factors to take into consideration when deciding to purchase a home.  Home buyers in the United States can deduct interest from their Federal Income Tax making affording a home even more easier.

For most Americans, owning a home is their largest financial asset and a major component of their investment strategy.  The NATIONAL ASSOCIATION OF REALTORS® estimates that the value of an average home rises by 4.5 percent a year. That’s a healthy return on investment. Still, no investment is guaranteed. Many Americans lost value in both their homes and investment accounts in the last couple of years, and it will take some time to recover.

Homeownership is how many families begin to accumulate wealth. According to the most recent data from the Federal Reserve Board, a homeowner’s net worth is 34.2 times that of a renter’s. (Median net worth of $174,500 for owners versus $5,100 for renters.)  Families who own their home tend to move less than renters.  This leads to more stable neighborhoods where there is more community involvement and sometimes even less crime.

You may wonder whether it is worthwhile to wait to purchase your home until prices are at their lowest. Prices are not the only factor that should drive your decision. Currently, interest rates are at all time lows that greatly improve the affordability of homes, especially for first time home buyers.  Talking with a Certified Financial Planner can help you decide if you are ready to jump into home ownership.  Your local bank may have financial planners on staff or maybe able to refer you.

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