To Rent or Buy a Home?

August 8, 2011

Is it more beneficial to rent or to buy a home? Investors have pondered this question for years. The truth is right answer varies depending on a person’s financial situation and needs.

Buying a home can be extremely advantageous as your investment can greatly increase in value overtime, allowing you to sell at a profit. Also, unlike other investments, purchasing a home serves a double purpose: you can increase your capital as well as live in your investment. Furthermore, mortgage expenses are often equal to those incurred through rent.

Paying off a mortgage also makes you save. As you pay off your mortgage you increase your personal capital, therefore when it comes time to sell your home you will have more money in your pocket.

However, you have to be careful when deciding to invest all of your money into your home. It is not advisable to put all of your eggs in one basket. The market is unpredictable and you never know when you will need to sell your home. Consequently you cannot predict whether prices will be up or down. No investment is guaranteed to be profitable.

Also, there can be a time lag when selling your home, the process can take months. Thus you may only retrieve your capital in a substantial amount of time.

Furthermore, unlike renting, buying a home comes with many expenses which are not all predictable; such as repairs, renovations, taxes, heat, hydro, etc.

All in all, it is important to diversify your investments. It is not wise to invest all of your capital into one asset.

More information from The Globe and Mail website.


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