5.1.1 Your home

From: Financial Consumer Agency of Canada

Owning a home is one of the foundations of the North American dream. In 2011, about 69 percent of Canadians owned the homes they were living in, which amounts to more than 9.2 million homes. About three-fifths of homeowners had a home mortgage. The average value of home mortgages in 2010 was about $145,000.

When Canadians take on that much debt—almost twice the average family income—they are making a major commitment. In most cases, it is the largest financial transaction Canadians will make in their lifetime. Sometimes, however, the decision is rushed and not thoroughly researched. It may be based more on emotional reactions, appearances or misinformation than on an understanding of the true costs and issues at stake.

Later sections of this module will review specific aspects of mortgages, but the first question many people ask is whether they should buy or rent. Sales agents for homes may promote the value of a home as an investment. However, the choice is not always a clear one.

Renting may be cheaper than paying a mortgage, and it avoids the large initial costs of a down payment and sales and legal fees. If you invest the difference between the rent and a mortgage payment and the other savings of renting, will you be better off financially? In many cases you will, although the calculation depends on rates of return on your investment, changes in the value of your home, housing costs, the mortgage rate and other factors.

Factors beyond your control may also turn your home into a costly project. Construction defects such as foundation problems, subsidence, water leaks and mould can require expensive repairs. In addition, you have to maintain and repair your home to keep it from losing its value. Even cautious buyers may find that the costs of home ownership are much higher than they were prepared for.

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