It’s Better to Own Than Rent – 5 Reasons

Reason 1: Mortgages are cheap
Interest rates are extremely low.  However, they won’t stay this way forever.  It may even be cheaper to own than rent.  In Calgary, $400,000 will buy a relatively basic, yet quite nice home and with only 5% down and an interest rate of 3.25% (there are better rates available), with a 25 year amortization, the payment would be about $1,850.00.  Even with insurance and taxes the total would be around $2,200 per month.  That same house would likely cost more than that to rent.



 

Reason 2: Your life – live it your way
Want a dog?  No problem.  Want to add a patio and a hot tub to the yard.  How about a new kitchen?  Tough to do when you don’t own the home.  However, if you own you can do what you want with the place (subject to zoning and other legal restrictions, of course).  The freedom to do what you want to make your home truly yours is a great reason to buy a house.

 

Reason 3: Build Credit

This might seem obvious and not all that important because most people who are in a position to buy a house already have good credit but a long history of on time mortgage payments is good for the credit rating.

 

Reason 4: Build Equity
Equity is important and useful for many reasons.  It can help pay expenses in an emergency situation, help with the kid’s education or, just about anything you want.  A bank is more likely to loan you the money for a new boat if you have $100,000 equity in a home than if you are renting and have no equity.

 

Reason 5: Owning will likely be a good investment, but even if it isn’t, it’s still much better than renting for your financial future
Over time your home should appreciate in value, but let’s say it doesn’t.  It is still better for your long term financial picture to own.

 

Let’s use the example from above.  You buy a $400,000 house and after 25 years you have paid off the mortgage and you now own the home, free and clear.  Hopefully it will have appreciated significantly in value.  You will have paid $660,000 in mortgage payments, insurance and taxes.


However if you pay rent and rent increases at a very conservative rate of only 1% per year you after 25 years you will have paid over $745,000 in rent and have nothing to show for it.  Worse, you will still be paying rent, but if you had bought, the mortgage would be paid off.

So, while history shows that owning your home only has an average return of 4%-6% on a long term basis, this is still far superior than renting and not building any equity.  Home ownership still is the way to go!




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