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To Rent or To Buy?

The earlier that you can direct your housing payments into a mortgage, instead of rent, the faster you will start building equity in your home.

Equity is the difference between the value of a home and the amount that is borrowed against it. As you pay down a mortgage, or as the cost of real estate increases, your equity grows. It is important to consider that owning a home is a long term commitment, so if your move is short term or you are not sure yet where you want to move, renting may outweigh owning.

5 things to consider when determining if you are ready to make the leap and buy, over renting:

  1. Do you have at least 5% for a down payment? In Canada, the minimum down payment requirement is 5% of the purchase price of a home. For example: Asking price for home is $500,000 ($500,000*0.05= $25,000), therefor $25,000 is the minimum down payment required for this property. Please keep in mind this is simply just the down payment required. If your down payment is less than 5%, you are also subject to Canada Mortgage Housing Corporation (CMHC) fees as well. This premium, in most cases, is added to the top of your mortgage. For example: Purchase price $500,000 - down payment of $25,000 = $475,000. CMHC premium is added to the $475,000. Let's pretend it is $20,000. $475,000 + CMHC $20,000 = $495,000, which is the total amount borrowed from the financial lender.

  2. How much do you pay in rent now?

How much are you comfortably affording now for rent? Do you have to pay utilities? Compare what you are paying now and your cash flow and use this link to play around with numbers to compare your current situation to owning your own home.

3. You have money saved/accessible to you for closing costs? E.g. Lawyers fees, home inspections, Deed Transfer, etc.

  • As mentioned above, the minimum down payment in Canada is 5%.

  • These savings can come from personal savings, but you will need to provide proof of the money being in your account or at least where the money came from for 90 days.

  • You can also have the money gifted from an immediate family member. There will also be 90 day verification on these funds as well as a Signed Gift Letter from the Donor to the Recipient.

  • If you are a first time home buyer, there are other government programs which could help you reach your down payment requirments. If you are curious about these, just reach out and we can try our best to guide you!

4. Do you have good credit?

  • Good credit will ultimately help you secure your loan. When applying for any sort of loan or mortgage, the financial lender primarily looks at 2 things: Your Total Debt Servicing Ration (TDS) and your credit history.

  • Different lenders have different leniencies when it comes to credit score. But keep in mind, while we may be able to secure you a loan with less than favorouble credit score, this typically comes at a cost - that is, a higher interest rate.

  • The benefit of going with a a Broker is, we can source different rates and policies from various different lenders, to ensure we are getting you the best possible solution with the best possible rate.

5. Keep in mind other expenses that will come with home ownership, including, but not limited to, property tax, heat, power, water, maintenance, etc.

  • There will be additional expenses to owning a home, in comparison to renting.

With some of the fastest growing apartment rental prices in the country and a housing supply that simply cannot keep up with demand, there is no doubt that we are in a comples housing situation, leaving many with limited housing options.

If your lease is coming to an end, or if you simply cannot find an apartment due to record low vacancy rates, you may be in better shape than you think for home owner-ship.

Let's get you pre-approved and see where you stand!

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