Decide To Buy A Home Or Condo

Owning your own home… a good investment or not?

If you are looking to get rich quick by investing in a home like your grandparents, and to a lesser extent your parents did in the 70’s & 80’s then think again. Demographics have shifted such that rapid increases in home prices are gone forever, in fact many home prices took a dive in over heated markets, many of these regions have yet to recover.

Even if phenomenal rises in real estate are gone forever, buying a home still has three main advantages, and these advantages are the primary reason that as soon as your lifestyle warrants you should run to buy a home:

  • All gains on your principal residence are Tax-free!
  • Buying a home is a perfect forced savings plan; if you do not make your monthly payment then you lose your home and quite often much of the equity you worked so hard to build.
  • Finally and most obvious is that your monthly payments are going to build equity for you, not your landlord! Consider this if you make payments of $800 per month rent for five years you will pay your landlord $48,000! Make an $800 mortgage payment on $100,000 and you will have at least built $13,000 in equity.

When should you make the leap?

First, ensure that you are ready. You need to be in the home on average for at least five years. This depends on how much you put down and that your home gets only a moderate increase in value. The costs for CMHC insurance, and all closing fees immediately put you behind. You need to make payments for a few years to ensure you do not sell at a loss. Let’s look at an example: let’s say you buy a home for $100,000 today with a five percent down payment. Your costs are as follows:

This is $5,550 dollars more than your down payment!! Now let’s say you sell the home in two years and it has made a modest 5% increase in prices in those two years. Therefore you sell it for $105,000. Now let’s look at your costs on this side:

Therefore your net proceeds from the sale are $96,636. However your outstanding mortgage to pay off is $95,816! Your net money is a whopping $820.

In short buying a home is definitely a rewarding and exciting experience we only want to ensure you consider all the factors, speak to one of our mortgage planning specialists to get a personal counseling session today.