7 Financial Benefits of Buying a Home

If you have entered this website, it is probably because you are interested in buying a home in Abbotsford. We believe that you have had a wonderful idea, and there is no reason for you or your family to have doubts about this step. Here we are going to review some of the financial and personal benefits of buying a home. I will also explain some common myths and fears, and how to overcome them.

Investment value: You earn what you pay and a little more

Perhaps you have heard people talking about what real estate is a great investment. But what exactly do you get with that transaction? The answer is multiple: You will accumulate “equity”, instead of spending your money to pay rent, you will have an immediate benefit, represented in a place to live and, you will have absolute ownership of an asset that -over time- has a good chance to go up in value. Let’s now look at 7 great financial benefits of buying a home:

1) Leverage

Buying a property is a special case where you can control the increase in the value of your asset, with a comparatively low initial investment in cash (your down payment). This is known as “using someone else’s money,” because the lender will loan you money for the difference between your down payment and the current value of the property, with a relatively low interest rate. Then, you are going to get the increase in the value of the property for its full value, not just for the value of your down payment.

2) Equity

Over time, and assuming that you pay the mortgage monthly and on time, two things begin to happen: Your loan balance goes down, and the market value of the house can go up. The combination of both means that you are accumulating “equity”. Equity is the market value of the homeless all debt associated with the home.

Lyn buys a house for $ 300,000 with a $ 30,000 down payment (10%) and a $ 270,000 mortgage. If the market value of the house is $ 300,000, Lyn has equity of $ 30,000 on the house (market value less mortgage). A few years later, Lyn has paid the mortgage regularly and reduced the balance by $ 5,000 to $ 265,000; on the other hand, the house has risen in price to $ 315,000. Now, Lyn has $ 50,000 of equity: $ 315,000 minus $ 265,000. This is $ 20,000 more than the original investment.

4) Its better than paying rent

A good part of the money that you are going to use to finance your house is the money that you are already spending – anyway – on rent. When you buy a house, that money goes towards your own investment.

5) You can live on your investment

Some people think of the mortgage as a “forced savings plan”, because it makes you put in a little money each month, in the form of the mortgage payment; and you will get that same money back when you sell the house.

Other people conceive it as a “smart savings plan”, because it gives you – simultaneously – a home and your money becomes “equity”.

6) You can borrow from your own investment

Over time, when the equity in your home increases, you can borrow some of that equity at a relatively low interest rate, with a type of loan called a home equity loan.

Interest tends to be higher than a primary mortgage, but lower than a credit card. This money can be used for various personal purposes, for example, building an improvement in your house, paying for your children’s university, buying a car, etc.

 

 

7) It is a symbol of solvency

From the perspective of your credit score, a mortgage is viewed as “good debt.” When you pay your mortgage responsibly, credit reporting companies take it as a sign that you are responsible and capable of handling long-term debt; and this can be especially useful for – later – to apply for car loans, for businesses, studies, etc.

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