Buying a home is a major commitment, both financial and emotionally. For many first time buyers, the decision to enter the housing market is made after extensive consideration. For those who previously rented, buying a home means the end of paying rent and the associated disadvantages. Investigating the housing market is the first step towards the dream of home ownership. This column looks at the benefits of owning versus renting.

There are many good reasons to stop paying rent and to decide to enter that housing market. Renting is suitable for a large number of people in many situations. However, renters are sometimes at the whim of their landlord. Additionally, when you pay rent, you are not accumulating any equity. This means that the money you pay in rent is not working towards your ownership of property. In fact, your rent payments may even be helping to pay your landlord’s mortgage!

Entering the housing market enables homeowners to establish equity in their home. This is accomplished by making mortgage payments instead of rent payments. Mortgage payments both reduce the debt you owe your lender and enable you to accumulate equity in your property. Once you pay off your mortgage, the amount of equity in your home will equal its current market value. One day you may need to borrow against this equity to fund a major purchase or pay for your children’s education. Renting does not afford this advantage.

There is another major advantage to buying a home. If your home rises in value, that increase is not taxable. With tax a ubiquitous part of life for Canadians, it is interesting to note that any increase in the value of your home is tax free. For example, if you buy your home for $200,000 and sell it for $300,000, the increase of $100,000 -- a capital gain -- is not taxable. Considering the rate of tax applied to other investments, this makes home ownership a very worthwhile investment!

Another reason to enter the housing market is timing. With interest rates still being very low, there has not been a better time for first-time buyers to enter the housing market. Lenders are hungry for business and are offering very competitive mortgage rates. Additionally, there are many government programs specifically designed to encourage first-time buyers to enter the housing market. If you have never before owned property anywhere in the world, you may be eligible for an exemption from Land Transfer Tax. This can potentially save you thousands of dollars. In addition there are programs that may allow those eligible to purchase a home with a very small down payment. This gives many people who otherwise could not afford to enter the housing market the opportunity to do so.

History has proven that entering the housing market can be a prudent investment. Along with the advantages of a good investment, the pride of ownership makes it worthy of consideration.