Krystal Yee, The Toronto Star, September 26, 2011 Section B7

There is a lot to think about when buying a first house and sometimes the decision can be overwhelming. And, with so much talk about a coming housing correction, is renting a better option?

There is definitely a perception that once you've become a homeowner, you've "made it." Sometimes that notion makes it hard to think rationally about the purchase, especially when you've fallen in love with a property or convinced yourself that you can afford something outside of your price range.

Here are four lies we often tell ourselves to justify home ownership:

1. The bank wouldn't give me a mortgage if they didn't think I could afford it; unfortunately the bank isn't your friend. They are in the business of making money for their shareholders. They are perfectly willing to lend you more than you should borrow. Why? Well, because you'll likely cut out your retirement savings, vacations and that new car you've been wanting rather than default on your mortgage. And the bigger the mortgage, the bigger your interest payments to the bank.
2. Once I get that raise, things will be better; this might be a true statement when you're trying to get out of debt or save money, but when it comes to paying for the biggest purchase of your life, is it smart to be counting on money you aren't certain you will have? Even more important than the down payment is the ability to spend within your means. If you cannot create a budget based on current income, chances are you won't be able to make it work if you make more money in the future.
3. It's better to buy than rent and pay somebody else's mortgage; more often than not, renting will be cheaper than owning.  And in two of Canada's most expensive cities - Toronto and Vancouver - renting can be so much cheaper than paying down a mortgage that it's tough to even make a case for becomeing a homeowner.  Whether paying your own mortgage becomes better than paying somebody else's depends on a lot of factors - when you buy, how long you plan on owning, and how much extra you have to put into the home.
4. A mortgage is like having a forced retirement savings plan; if that's the case, then it's the worst savings plan I've ever seen. For the majority of your mortgage amortization, more than half the money is an interest payment. My mortgage payment is $600 every two weeks. Of that, $335.29 goes toward interest, while only $264.71 is applied to the principal balance.

When it comes time to sell, homeowners are often fooled into thinking they've made more of a profit than they actually have. Most people use the simple formula of subtracting the purchase price from the selling price.

But that formula doesn't take into the consideration the non-mortgage costs of owning a home - commissions when you sell, closing costs, property tax, home insurance, maintenance fees, renovations and repairs - none of which you would have to pay if you were renting.