Renting Vs. Buying: What You Need to Know!.

When it comes to the Canadian housing market, there are lots of options for where to live! From renting an apartment to owning a single-family home, it all comes down to where you see yourself living and what you can afford! The beauty is, there is no right or wrong answer when it comes to renting versus buying but let’s break down the pros and cons of both and hopefully help you to decide which is best for you!

why do people rent?

One of the most common answers to this question is affordability. Most people rent because they believe it is cheaper than owning a home. This can be true in some cases, but there are also times when monthly rent costs are higher than monthly mortgage payments. Of course, there are also cases where rent is far more affordable than buying, especially when you factor in the cost of a down payment and maintenance on a home you own, rather than one you rent. Affordability is fairly dependent on an individual’s situation, but it is not the only decision factor for choosing to rent.

Another reason individuals may choose to rent is that they simply aren’t sure where they want to live, or maybe they cannot find a place that fits their needs. If you are new to an area, you may want to rent in the meantime so you can get to know the neighbourhoods and determine which area is the right fit for you. In some cases, you simply may be unable to find a home that is affordable to buy in the area you want or within a reasonable commute from your work.

For individuals who travel a lot for work or like to be free-floating, renting can be the perfect option but if you simply believe buying a home to be out of the question, it is time to take a hard look at your options because it may not be so far fetched!

pros and cons of renting:

To help you decide if renting is right for you, we have put together a little list of pros versus cons to help you see if it is the right fit.

why do people buy?

According to the most recent data, Canada boasts an overall homeownership rate of 67.8%. Even for those Canadians aged 35 and under, more than 40% of households own their own homes. This is quite an impressive statistic! So, let’s look at why people choose to buy.

One of the main reasons that people choose to buy a home is to have the stability and peace of mind of owning the place you live. This means you are not at risk of being put in a situation where the landlord wants to move their parents into the basement suite and you have to leave or having to deal with increased costs if you go to renew a lease agreement.

For others, the benefit to buying comes in building up equity and ensuring that nest egg for your future. When you choose to rent, you are paying into someone else’s mortgage and into their future but when you work towards buying your own home, suddenly all that money you invested is going to your future instead. This is an extremely important aspect to consider in today’s age when many are having trouble with the idea of saving for retirement.

Now I get it, you may be thinking “if I can’t afford to retire, how can I afford to buy a house” but if you can afford to pay the high cost of rent in today’s market, then home ownership isn’t as far out of reach as you think. This is especially true if you buy a two-story home and rent out the basement, giving you ample living space upstairs but also additional income to pay your mortgage.

pros and cons of buying:

To further show the benefits and costs to buying, we have broken down some pros and cons to help you to determine if this is the right path for you.

to rent or buy, that is the question!

Did you know? 4 in 10 households spend more than 30 per cent of their pre-tax income on rent, which is above the commonly accepted affordability threshold.

The latest National Bank report revealed that monthly mortgage costs for median-priced condos was higher than the average monthly rent for a similar unit in Toronto, Montreal, Vancouver, Victoria and Hamilton. At the same time, monthly mortgage payments were lower than rents in Calgary, Edmonton, Quebec City, Winnipeg and Ottawa. While this data does not include suburbs, it shows a staggering difference between mortgage payments and rent payments.

If someone can rent for $900 a month or pay a mortgage of $1200 a month, it may seem like a no brainer but it is important to remember that paying rent does not build equity! However, if you are unsure of where you want to live or cannot find a suitable and affordable home with a close enough commute to work, renting may be your only option. This is where checking listings and discussing with a real estate agent may open doors and where a mortgage broker can come in handy to help you determine if purchasing a home is viable in your near future.

yes, you can buy!

The reality is that in the long run, homeowners often fare financially better than renters because homeownership enables forced savings that accumulate over the years, growing into a sizeable nest egg.

If you are unhappy renting or really prefer the idea of owning your own home, you CAN. It is time to stop assuming you cannot make the leap from renting to buying – all you need is the right information and the right preparation!

To determine if you are able to purchase a home, a good place to start is the My Mortgage Toolbox app from Dominion Lending Centers. This app is perfect for seeing what you can afford. Using the app to calculate minimum down payments and monthly mortgage costs can help you to get a good picture of the financial landscape and your options. Looking at your budget and evaluating your current rent costs and other monthly expenses can also help you to determine your affordability bracket.

Some other things to consider before buying include:

• Your credit score – do you have good financial standing to be approved for a mortgage?
• Your savings – do you have any money put away for a downpayment? If not, do you have wiggle room in your budget to start saving?
• Your time – do you have the resources to maintain a home from the yard to any necessary repairs?

If buying a home to live in is out of the question due to the availability in your area or cost of homes close to work, another option is to consider an investment opportunity. Maybe you cannot afford to buy in the area you want so you rent in order to keep your commute short and be in a neighbourhood you love. However, you can still reap the equity benefits by investing in a vacation or rental property which would give you the necessary nest egg and help you feel more secure about your future financial situation. You could keep the investment property as long as you want! If you end up finding the perfect home in your area down the line, you could always sell your investment property and take the earnings for a down payment on the right home – or keep it as an extra security blanket!

Regardless of whether you choose to continue renting or make the leap to owning your own home, the most important factor is your financial security. What works for your friend or your parents may not work for you – and that is okay! However, educating yourself and looking into all the options will ensure that, at the end of the day, you are in the best situation for yourself.

Written by y DLC Marketing team

Power Up Your Finances.

Let’s face it, mere mention of the word “money” can make people shift in discomfort. In an era in which the veils are being lifted off many societal taboos, a shroud of shame hangs stubbornly over money talk – we’re taught to fear it, we’re taught it’s too complicated, and those are all messages meant to disempower.

It’s time to push past the taboo, and normalize talking about money. Disrupt it by talking about it – openly and frankly – with your partner, your friends, your family, and your colleagues. Speaking of partners, it’s important both parties are open with one another about their fears, feelings, and goals in regards to money. This is particularly important in opposite-gender households, where research shows that the male partner takes the financial lead in most homes.

snce Senior Program Specialist, Sarah Zandbergen, has this to say about the hesitation to discuss finances with partners: “It can be difficult to bring up, no question, but if you’re sharing your life with someone, finances are bound to come up. A staggering statistic we came across in our research is that 90% of women will be the sole financial decision-maker in their family at some point in their lives. Knowing this, there is absolutely no excuse to defer ownership to someone else.”

Smash the stigma, and get radically transparent about your salary, your financial situation, your debts, your windfalls, and your savings goals.

And, hey, we get it – there’s a sense of comfort, albeit a false one, that comes with avoiding fiscal responsibility, because it temporarily absolves us of having to do anything, but remaining on the sidelines gives money a leg up on you. So if you want to be truly in control, increasing your knowledge about money, and how to save it, is a critical part of the confidence-building process

First-Time Home Buyer.

Being on the path to purchasing your first home is one of the most exciting and most rewarding moments in life! While people don’t always dream of the perfect mortgage, we do grow up thinking of a white picket fence and our dream home. Even if you imagined your dream home as a 6-bedroom mansion, we all have to start somewhere!

Regardless of whether you’re buying an apartment, townhouse, rancher or two-story family house, there is nothing quite like your first home. Not only is it an amazing accomplishment and a great sense of freedom and security, but buying your first home is also a great step into the real estate market and can provide you equity and a leg-up towards future expansion.

are you ready to own a home?

Before you jump on in, there are some things you should ask yourself. As amazing as it is to be a first-time home buyer, it is important to remember that this is likely the largest financial decision you will ever make. There are a few questions you can ask yourself to make sure you’re ready to take this incredible leap!

1. Are you financially stable?
2. Do you have the financial management skills and discipline to handle this large of a purchase?
3. Are you ready to devote the time to regular home maintenance?
4. Are you aware of all the costs and responsibilities that come with being a homeowner? Let’s find out!

COSTS OF HOME OWNERSHIP:

There are two major costs of home ownership – let’s make sure you’re ready to take it on!

Upfront Costs: The initial amount of money you need to buy a home, including down payment, closing costs and any applicable taxes.

Ongoing Costs: The continued cost of living in a home you own, including mortgage payments, property taxes, insurance, utility bills, condominium fees (if applicable) and routine repairs and maintenance. It is also important to keep in mind potential major repairs, such as roof replacement or foundation repair, that may be needed now or in the future. In addition, if you choose a property that is not hooked up to municipal services (such as water or sewer) there may be additional maintenance costs to consider.

buying your first home

If you’ve decided to take the plunge, you now need to start by figuring out what you can afford. Fortunately, there are all kinds of calculators and tools available. A great place to start is the free My Mortgage Toolbox app which can help you find a mortgage broker in your area. A mortgage broker is a great alternative to traditional banks and can help you find the best rate in the market, as well as save you time by doing the leg work for you!

Regardless of whether you choose a mortgage broker or traditional bank, the first step begins with your down payment.

SECURING YOUR DOWN PAYMENT

If you are ready to get your first mortgage, you will need a down payment. The minimum down payment on any mortgage in Canada is 5 percent but putting down more is beneficial whenever possible as it will lower the amount being borrowed. However, if you can only afford the minimum that is perfectly okay! Just remember, if you are putting down less than 20 per cent to purchase your home, default insurance will be mandatory to protect the investment.

Ideally, individuals looking to purchase their first home will have built up a nest egg of savings that they can apply towards a down payment. However, we know this is not possible for everyone so if you don’t have it all saved, don’t worry! Besides being a vital savings plan for retirement, RRSPs can be a great resource for first-time home buyers and can be cashed in up to $25,000 individually towards a down payment. In fact, most mortgage brokers will tell you nearly half of all first-time buyers use their RRSPs to help with the payment. Those first buyers who choose this option will have 15 years to pay it back and can defer these payments for up to two years if necessary. Always remember though, deferring a payment can increase the time to pay off the loan and you will still owe the full amount!

Another option for securing your down payment is a gift from a family member, typically a parent. All that is required for this is a signed Gift Letter from the parent (or family member providing the funds) which states that the money does not have to be repaid and a snapshot showing that the gifted funds have been transferred.

MORTGAGE PRE-QUALIFICATION

The first step to realizing the dream of owning your first home is pre-qualification. This process provides you with an estimate of how much you can afford based on your own report of your financial situation. The benefit of this is that it sets the baseline for a realistic price range and allows you to start looking for that perfect home within your means! Now this process is not a mortgage approval, or even a pre-approval but it helps to establish your budget. You must supply an overview of your financial history (income, assets, debt and credit score) but the real requirements come with the pre-approval process where you submit your actual documentation.

MORTGAGE PRE-APPROVAL

This is the meat of the pre-purchase process and determines the actual home price you can afford. The difference between this and pre-qualification is that pre-approval requires submission and verification of your financial history to ensure the most accurate budget to fit your needs.

Pre-Approval can help determine:

• The maximum amount you can afford to spend
• The monthly mortgage payment associated with your purchase price range
• The mortgage rate for your first term

Not only does getting pre-approved make the search easier for you, but helps your real estate agent find the best home in your price range. Temptation will always be to start looking at the very top of your budget, but it is important to remember that there will be fees, such as mandatory closing costs, which can range from 1 to 4% of the purchase price. Factoring these into your maximum budget can help you narrow down a home that is entirely affordable and ensure future financial stability and security.

While getting pre-approved doesn’t commit you to a single lender, but it does guarantee the rate offered to you will be locked in from 90 to 120 days which helps if interest rates rise while you are still shopping. If interest rates actually decrease, you would still be offered the lower rate. Another benefit to pre-approval is that, when it comes time to purchase, pre-approval lets the seller know that securing financing should not be an issue. This is extremely beneficial in competitive markets where lots of offers may be coming in.

PROTECTING YOUR PRE-APPROVAL

• Refrain from having additional credit reports pulled once you have been pre-approved
• Refrain from applying for new credit, closing off credit accounts or making large purchases until after the sale is complete
• Be prepared to show a papertrail – any unusual deposits in your bank account may require explanation. Also if your down payment comes from savings, the bank will want 90 days of statements to ensure the funds are accounted for.

FINANCING APPROVAL

You’re almost there! Financial approval is the last step to getting your mortgage and buying your first home! You will need to keep in mind that just because you are pre-approved, it doesn’t guarantee that the final mortgage application is approved. Being entirely candid with your home-buying team throughout the process will be vital as hidden debt or buying a big ticket item during your 90-120 day pre-approval can change the amount you are able to borrow. It is best to refrain from any major purchases (such as a new car) or life changes (such as changing jobs) until after closing and you have the keys to your new home!

In some cases, pre-approval may not be guaranteed for reasons outside of your control. For instance, if the home was appraised below the purchase price, is a heritage home or has safety issues like asbestos, the lender may deny financing. Find a realtor that will be your advocate while showing you homes and always utilize an appraisal and inspection from foundation to roof to ensure that you do not encounter any hidden roadblocks!

CLOSING DAY

Phew, you made it. Closing day is one of the most exciting moments where all the house hunting and paperwork really pays off! It is on this day that you will want to make use of your lawyer or a notary.

To complete the process of closing the sale, your lender gives your lawyer the mortgage money. You would then pay out the down payment (minus the deposit) and the closing costs (typically 1 to 4% of the purchase price). From there, the lawyer or notary then pays the seller, registers the home in your name and gives you the deed and the keys!

Congratulations, you are now a home owner!!

Written by my DLC Marketing Team

5 Reasons to Invest in a Home Inspection.

While home inspections might not be the most exciting part of your home buying journey, they are extremely important and can save you money and a major headache in the long run.

In a competitive housing market, there can sometimes be pressure to make an offer right away without conditions. However, no matter how competitive a market may be, you should never skip out on things designed for buyer protection – such as a home inspection.

You may have a good eye for décor and love the layout of your potential new home, but what is under the surface is typically where headaches can lie. We have all heard the expression “don’t judge a book by its cover” so why would you make the most important purchase in your life without checking it out?

In fact, there are six reasons that a home inspection might just be the best $300-$500 you ever spend.

it provides an “out”

When buying a new house, it is always best to avoid taking chances. While a house may look great on the surface, hidden structural issues such as cracked foundation or roof damage can easily turn into expensive repairs. A home inspection can help reveal any large and/or hidden issues, which can often provide an ‘out’ for the buyer.

If you find something that will cost a considerable amount to replace or repair you can go back to the seller’s agent and ask for a reduction in the price. A leaky roof may cost a few thousand to replace. Perhaps the seller would split the cost with you? It’s worth asking. If the price cannot be re-negotiated if issues come to light, then it is best to just walk away on the basis that the home will cost you too much in the long run.

confirms safety and structural integrity

Another benefit of having a home inspection is not only to find issues, but also to confirm structural integrity. During an inspection, the inspector will review everything from the attic to the furthest reaches of the basement and will look for things like mold, holes in the chimney, saggy beams or improper wiring.

reveal illegal additions or installations

Similarly to determining any safety and structural issues, home inspections can also reveal hidden additions or DIY installations that may cause trouble down the road. If the seller wired the house improperly or used substandard materials, it not only could cost you big in the future but it could even null and void your home insurance should something happen!

forecast future costs

A home is an ongoing expense, much like a car. Unless it is brand new, there will be regular maintenance and updates required to replace things when they become old and inefficient. For instance, water heaters typically last for 6-10 years, the life of a good roof is around 20 years, while furnaces can last up to 25 years. The home inspection report will include an estimate on the remaining life for each of these big-ticket items, which will give you a heads up on future expected costs and provide you time to save for their eventual replacement.

peace of mind

Finally and perhaps most importantly, getting a home inspection is important for your own peace of mind. A home is a huge investment, and one that you will be paying off for 20 or 30 years. It is much easier to feel good about your investment after you have gone through a home inspection and you know that the house is safe and that you won’t run into any surprise problems down the road. While a home inspection isn’t free, peace of mind is priceless and a few hundred bucks is worth it!

Written by my DLC Marketing Team