If you are renting right now, you may have spent some time thinking about buying a home. There are some very good reasons to invest in a home, but there are also reasons to think with care about taking this step, especially if this is your only investment.
Why would I want to invest in a home?
- You are investing in something that has value: When you buy a home, you own it (at least the part that you don?t owe the bank through a mortgage).
- Your home can go up in value: You may be able to sell your home for more money than you paid for it. You can use that money to spend on a new home, save, invest, or do whatever you like.
- You get to live in your investment: You have to live somewhere. You can't live in a Guaranteed Investment Certificate (GIC) or mutual fund.
- The cost may be about the same as rent: In some cases, your monthly mortgage payment to the bank may be about the same as what you would pay in rent.
- It forces you to save: With each mortgage payment you make, you own a little more of your home. The more you own of your home when you sell it, the more money that goes into your pocket.
What are the dangers of putting all my money in my home?
- Housing prices can fall: If you buy your home when prices are up, and then have to sell when prices are lower, you could lose money.
- Bad luck happens: Homes can get damaged by fire, wind, or water. You should have home insurance, but insurance doesn?t always cover everything.
- Getting your money may not be easy: It can often take months to sell your home and get your money back.
- There are other costs: There are lots of costs when you own a home, including roof repairs, painting, heat, property taxes, and hydro, to name just a few.
Remember: Don't put all your savings in one investment
Buying a home can be an important part of your investment plan. Still, think carefully about your financial situation before you take this major step. You are usually better off if you have a number of different investments. Then, if one does poorly, you can hope the others do better.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.