Hello, David your friendly real estate lawyer here!
Today’s topic deals with the implications of renting out your new property. The short of it is that if you plan to rent out a new property you are about to purchase (or have purchased), you may not qualify for a built-in rebate in price from the developer. Interesting? Keep reading. (more…)
If you’re renting, you may dream about owning a home of your own – a place to furnish and decorate as you like …to set down roots … to enjoy a great neighbourhood, and to entertain friends and family.
But you may be uncertain whether you’re ready to make your move from renting to buying, especially if you haven’t started saving. Fortunately, with today’s low mortgage rates and more flexible down payment requirements, your first home may already be within your reach.
Along with your own personal motivation to own a home, there’s a sound financial reason to buy now: your home may be the single biggest investment you’ll ever make, one that could pay off significantly in the long run.
Consider this: over the past 10 years, there has been a 65% increase in the value of the average Canadian home. To put that into dollars and cents, the average home in Canada would have cost $150,720* in 1985. Today, that same house would be valued at $248,176 – a big increase in value over this period of time.* And, of course, the earlier you can redirect the money you currently pay in rent into paying down a mortgage, the faster you’ll start building equity in your home.
An investment that lets you sleep at night
Does the increase in value shown above represent a good investment? The answer is yes, because housing is typically a stable investment, offering good rates of return. Relative to the stock market, which can fluctuate, your home typically offers you a dependable rate of return. And, of course,
you can’t live in a stock portfolio!
No roller coaster ride for today’s buyers
Today’s housing market differs sharply from the 1980s, when panic buying and an over-supply of homes caused violent swings in house prices. Unlike those over-heated times, we have been living in a period of low inflation and low interest rates, both of which help to maintain a strong, but steady, market for homes without wild swings in prices.
Demographics, immigration and a sound economy are all factors supporting the belief that a home will continue to be a good investment, at least in most parts of Canada.
Perhaps more than ever, location is the key factor driving price increases. So if you’re hoping to buy in a particularly desirable area, you may not want to wait: homes in these neighbourhoods are more likely to see above-average price increases over the next few years.
Get a tax break
There’s a tax advantage to purchasing a home. When you sell your principal residence for more than you paid for it, the increase in value, known as capital gains, is yours tax-free. So if, for example, your home sells for 25% more than you paid for it, it’s money in your pocket, rather than the government’s.
The long-term investment value of a home remains very good
Although no one can predict where prices will be 25 years from now, the Canadian Real Estate Association (CREA) reports that the average price of a home in Canada has risen by 200% since 1980*, making it one of the best investments available today.
At the end of the day, one of the biggest considerations isn’t the market, mortgage rates or investment value, but rather your desire to enjoy the comfort and privacy of owning your own home. In other words, the best time to stop renting and start owning is when you are ready.
* Source: Canadian Real Estate Association, 2005.
This article was brought to you by Bruna Anacleto, RBC Mortgage Specialist. For more information about making the move from renting to owning, contact Bruna at 416-508-6324 or email her at bruna.anacleto@rbc.com
How can I compare my monthly rental payments to mortgage payments?
Of course, the amount of your mortgage payments will depend on the price of the home you buy, the size of your down payment, prevailing mortgage rates and the term and amortization you choose. But it’s actually quite easy to estimate typical payments using the mortgage calculators available on our website: go to Royal Bank and click on ‘Mortgage Calculators’.
How do I know how big a mortgage I will qualify for?
A pre-approved mortgage is a great way to know how much you can borrow for your home. This, in turn, helps you set a price that’s realistic for your financial situation. It’s important to note that having your mortgage pre-approved doesn’t obligate you to buy a home: it’s simply a way to know how much your mortgage lender will approve you for. Our mortgage specialists can meet with you in your home, workplace or at a branch to take you through the pre-approval process.
I want to become a homeowner as quickly as possible but I haven’t saved a large down payment. Any suggestions?
You can now purchase a home without a down payment, as long as you meet approval requirements. All you need is 1.5% of the purchase price to cover closing costs. A mortgage specialist can help you consider whether this option is right for you.
Where can I find up-to-date information on home prices and the real estate market in my area?
-The Multiple Listing Service (MLS) offers an easy way to browse through home listing sin very part of Canada. Easy links let you look at the housing market in specific cities by neighbourhood, price range, type of home and other parameters. It’s a great way to get a sense for the t types of homes available in your community and their features and price ranges. Visit www.mls.ca
-The Canadian Real Estate Association (CREA) website helps you look at average home prices in communities across Canada and locate a Realtor in your area. The site also includes useful homebuying tips and a glossary of common real estate terms. Got to www.crea.ca
-The Canadian Mortgage and Housing Corporation (CMHC) provides a content-rich website with detailed, step-by-step information on buying, selling and renovating a home, as well as up-to-the-minute news of interest to homebuyers and sellers. Visit www.cmhc. ca and c lick on “Buying or Renting a Home”.
-RBC Financial Group provides detailed information on mortgage options and first-time homebuying at First Time Home Buyers
Frequently Asked Questions about buying a home has been brought to you by Royal Bank Mortgage Specialist Bruna Anacleto. For further questions or concerns about your mortgage, please contact her at 416-508-6324, or email her at bruna.anacleto@rbc.com
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