subject: Why You Should Own A Home [print this page] Every Canadian family should own their home! Getting a house paid for is a good financial goal. Once your house is paid for you should have more disposable income each month. The contrast is paying rent. After 20 years of paying rent you do not have anything. After 20 years of paying a mortgage you could own a home. In many markets a home will increase in value over time. Individuals may be better off investing in a home than investing in the stock market. Gains made on selling stocks are taxable; gains on selling your home are not. It is also possible that the home will increase in value much more than the stock market.
If you are paying rent, you might be able to afford a mortgage payment. Interest rates are at historic lows which should make it easier to qualify for a mortgage. A home will also cost you money for things like insurance and property taxes. If your rent included utilities, such as heat and light, you need to remember that your mortgage payment does not! It is important to make up a budget of what you think a house is going to cost you before you decide if you are ready to make that big change in your life. A house is seen as a real sign that you are settling down and growing up.
The principal residence rule in Canada means that you will not pay any personal income tax on any gain that you make when you sell your own home. This means a principal residence is a particularly good thing. The principal residence rule does not apply to rental property. In the US the rules are different, taxes apply on capital gains on selling your home but mortgage interest is deductible. A family can only have one principal residence which means that the gain on the sale of the cottage will be taxable when you sell it. You only have one principal residence at a time, but you can have more than one in your lifetime.
Once your mortgage is paid off you will have more cash in your pocket. How will you use these funds? Ideally, you will consult your budget to decide how best to allocate these dollars. A portion of the funds freed up should be used for retirement, unless you have that all under control.
Home ownership is one of the key items to helping you achieve financial prosperity. Purchasing an asset which should increase in value makes sense. This is a situation where debt, in the form of a mortgage, will increase your financial prosperity.
Paying rent for life is like flushing money down a toilet.
