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Buying a home is often one of the largest purchases that an individual will make in his or her lifetime, but not everyone knows how valuable owning a home is versus the costs associated with renting. Not only does home ownership offer terrific monetary benefits, but there are also excellent psychological benefits associated with owning one’s own home.

Great Tax Deductions

A home owner may take advantage of a number of special tax breaks and benefits associated with home ownership and each year that tax time rolls around, a home owner will be able to reduce their tax owed based upon projects like work done to the house and interest paid on the mortgage.  This is especially true if the homeowner is also running a small business out of their home (in which case a percentage of utility costs also becomes eligible for deduction).

If a home owner decides to rent out part or all of the residence, this action may also offer some positive tax deductions on the home owner’s tax return. Elements of home insurance and rates, such as those quoted at ired.com may also come into play for the aforementioned tax deductions.

Decorating the Home in Any Style

Residing in an apartment or a rented home often means that a person must put up with the rules and regulations associated with the rental agreement. It’s often not possible to make any significant changes to the space. Even performing a simple act like painting the walls of the apartment might be restricted if someone was renting the space. Part of what makes home ownership so terrific is that any home improvements and changes that a home owner wants to make are entirely the decision of the home owner. No rental management company has to be consulted. Since permission to perform the work isn’t necessary, it’s easy to plan fun projects and create new decorative projects whenever a home owner might want.  Being able to take pride in the aesthetic appearance of a home is more important to some people than others, but it is definitely a factor in the overall decision of buying vs renting.
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It is probably safe to say that most of North America is accustomed to living in 2600 square feet homes with just a family of two.  Or even 4000+ square feet homes with a family of four.  As I go apartment hunting I start to wonder how much is too small, and how much is “just enough” space for me?

Looking at smaller spaces has gotten me inspired.  There are lots of people living in small spaces, living a minimalist lifestyle, and not being attached to “stuff”.  This leads to smaller heating and utility bills, less spending on “things” that don’t ever end up fulfilling our needs or fulfilling our empty hearts.

Some of the benefits of living in a smaller space outside of cheaper utility bills are more global, meaning less consumption of things, less fossil fuels used, and less furniture to fill the space.  Less furniture means less materials used and less waste.

For example, average utility bills for an 1800 square foot house costs $140 a month and average utility bills for a 450 square foot apartment place costs $18 per month according to apartment therapy.

So How Much Space?

So how much space does one person need?  According to the engineering toolbox, the average person needs about 100-400 square feet of space to feel comfortable in an apartment.  That being said, it really depends on the person.  Some people need a ton of space to feel sane, some people can work with very little.  For example, I know quite a few couples who live together in 450 square feet of space.  They are still together (haha!) so perhaps living in a small space is testament to their relationship. Continue Reading →

Buying a home is a big deal. It is a long commitment (think 25 years) and a lot of debt. It’s certainly nothing to sneeze at. If you’ve hashed out the rent versus buy debate and have decided that for you, buying is what you want, you’ll want to think about how much home you can actually afford before you go home-hunting.

These days, the big banks are pretty uptight about loaning Average Joe money and will scrutinize your application much more than in the past. The Canadian banks are trying not to let a housing crisis occur (though some may beg to differ that nothing can stop this tsunami) and therefore are more evaluative in terms of loaning you money.

Thinking about the criteria to determine how much home you can afford from a bank’s perspective and from your own perspective is important before you take that plunge and make an offer.

The Banks Approach

In order to see how much money they should loan you (and to make sure you’re not just shooting the breeze when you say you made $75,000 last year), the banks will ask for your:

• Recent pay stub
• Recent bank statement
• Recent investment statements
• Latest T4

They use this information to see if you are a good candidate to lend money to. The banks typically do not loan you money that is more than 32% of your gross income should go to mortgage expenses. Though they would likely lend you more than the Housing Affordability Index would recommend. Continue Reading →