Homeownership Builds Wealth Over Time
Homeownership can be a very savvy financial move – but only if people buy homes they can actually afford. In 2018, this idea of sticking to a home you can afford to gradually build wealth is a “rule” that just happens to be new and old at the same time. Homeownership is a major driver of overall household net worth accumulation. A 2015 report by TD Economics found that housing is responsible for about one-third of the roughly $6.6trn increase in overall household net worth since 1990.
You Build Equity Every Month
Your equity in your home is the amount of money you can sell it for minus what you still owe on it. Every month you make a mortgage payment and every month a portion of what you pay reduces the amount you owe. That reduction of your mortgage every month increases your equity. Owning your own home can be a great way to create equity for the future and provide stability and security for you and your family.
You Reap Tax Deduction Benefits
First-time home buyers: First-time purchasers, or purchasers who haven’t owned a home in 4 years will want to take advantage of the First-Time Home Buyer’s Tax credit. With the ability to claim up to $5000 on the purchase of a qualifying residence, buyers can receive up to $750 in non-refundable tax credits for their new home.
Moving: If you relocated for work or school in the previous tax year, you may be able to claim a portion of your moving expenses on your taxes. To qualify, workers must have moved within 40km of a new place of employment while students must be enrolled full-time at a post-secondary institution and live within 40 km of their school.
Renovations: BC Provides a Home Renovations Tax Credit for individuals 65 and older and people with disabilities. Under this tax credit, renovations or alterations made to improve accessibility and safety can be claimed up to a limit of $10,000.
GST/HST New Housing Rebate: Canadians who have purchased, built or made substantial updates to their residence may be eligible for a GST/HST rebate on any taxes paid. Qualifying homes include new builds (purchased from a builder) for under $450,000, owner-built homes, and residences that have made major additions or renovations.
Energy Rebates: There are a number of rebates available for British Columbians looking to improve the energy efficiency of their homes. Updates include adding insulation, draft proofing and the installation of a natural gas water heater. For a full list of rebates, visit BC Hydro’s website.
Rental Income: Do you rent out a portion of your primary residence? When reporting their rental income, homeowners can claim certain expenses towards purchasing, improving and advertising their suite. This includes deducting a portion of large annual payments including mortgage interest, property taxes and even home insurance. As a general rule of thumb, the amount of money a homeowner can claim is based on the percentage of the square footage of their suite versus the rest of the residence.
Working from Home: Certain home expenses can be deducted for people who work from home. This includes employed individuals who use a designated office space inside their primary residence, or self-employed workers who use their home as their principal place of business.
A Mortgage Is Like a Forced Savings Plan
Paying that mortgage every month and reducing the amount of your principal is like a forced savings plan. Each month you are building up more valuable equity in your home. In a sense, you are being forced to save—and that’s a good thing. Your monthly payments will remain stable. Speaking of stability, with fixed–rate mortgages, your monthly principal and interest payments will stay the same for the entire period of the loan. This will make it easier to plan and budget.
Long Term, Buying Is Cheaper than Renting
In the first few years, it may be cheaper to rent. But over time, as the interest portion of your mortgage payment decreases, the interest that you pay will eventually be lower than the rent you would have been paying. But more importantly, you are not throwing away all that money on rent. You gotta live someplace, so instead of paying off your landlord’s home or building, pay off your own!
Homeownership enhances quality of life
You can take pride of ownership. One of the best things about owning your own home is that you'll have a place that is uniquely "yours" that you can customize — from paint colors to remodeling projects.
Homeownership improves your community. And last but certainly not least, you may find yourself becoming more involved in the community. Homeowners are more likely to support local businesses, thereby improving the local economy — and communities with high homeownership rates naturally attract more homeowners.
There is considerable evidence that positive homeownership experiences result in greater participation in social and political activities, improved psychological health, positive assessments of neighborhoods, and high school and post-secondary school completion.
A 2012 study commissioned by Habitat for Humanity Toronto came to similarly positive conclusions in its assessment of the social impact of housing. After achieving homeownership
95% of respondents said their families were stronger
81% reported an improvement in their children’s social life
76% reported an improvement in their children’s grades
72% reported strong community and neighbourhood ties
50% said they felt safer and more secure
Are you convinced yet? Contact me today to get pre-approved!