Re/Max Realty Specialists Inc.,
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Blog by Krisztina Neglia

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Should I Buy A House?

buy a home
If you are a first time homebuyer, you have probably been encouraged by family, friends and colleagues to own a home. However, you may still be unsure about certain steps in the home buying process and wondering if buying or renting a home is the right thing to do.  Having doubts is normal for first time homebuyers. However, researching into the home buying process helps to alleviate the doubts. Here are solid reasons as to why you should buy a home.

Pride in Ownership

Owning a home is a major achievement and that is the main reason why most people yearn to own a home. Unlike renting, owning a home gives you the freedom to alter the house to fit your personal style and taste. It also gives you the sense of financial stability and security.

Appreciation

While real estate prices have sometimes risen or dropped over the years, real estate has generally appreciated. According to the Canadian Real Estate Association, Canada’s home prices have been increasing over the last decade. During inflation, most homeowners view their homes as a shield against inflation.

Capital Gains Exclusion  

Under the Income Tax Act, every Canadian resident individual is entitled for capital gains exemption. The exemption allows you to earn up to $750,000 of capital gains, tax free, from disposal of certain types of property. This exemption increased to $800,000 in 2014 and may be indexed for inflation starting 2015.

Building Equity

Your monthly payment is applied to the principal balance of your loan, which reduces your obligation. If you are in a position of making a higher monthly payment than the usual amount, you may consider reducing your mortgage term. This is a faster way of building equity and saving you money on financial fees.

Preferential Tax Treatment

When you sell your home and receive more profit than the allowable exclusion, that profit will be considered a capital asset if you owned the home for more than a year. Preferential tax treatment is also extended to capital assets.

Equity Loans

Homeowners can borrow money against their home equity. There are two types of home equity loans; a fixed term loan and a line of credit.  A fixed term loan includes a lump sum that gets paid back monthly with a fixed interest rate within a specified period of time. A line of credit provides you with money when you need it; the method of paying back is similar to that of a credit card.  Although interest rates on a home equity is higher than that of a normal loan, it is usually much lower than that of a credit card.

Property Tax Deduction

Land transfer tax is deductible for income tax purposes and is usually 0.5% of the purchase price. According to the Toronto Real Estate Board, a first time home buyer in Ontario can qualify for $2000 in tax breaks on a $227,500 home.

When buying your home, a huge sum of money is at stake so you need to shop carefully and exercise a lot of patience. While buying a home is considered a worthy venture, do not mistake it for an investment especially in the short run. If you commit to own the home for at least 7 years, it’s possible to recoup your down payment and other transaction costs.