jeudi 18 août 2011

Why We Should Keep Renting

"Renting temporarily offers a way to bide your time while building up your savings. It costs less to rent than own, which means you can write your monthly rent cheque and then bank the money a homeowner would be paying for property taxes and routine upkeep and maintenance."

(Or in our case, instead of banking the money, using it to pay down our plane faster.)

Why does it cost less to rent than own? Here are seven homeowner costs that renters don't pay:

1. Property taxes (between 2000 and 3000 per year, from what I've seen in the houses I've looked at)
2. Home maintenance (Some sources suggest you should budget for up to 4% per year, which would be $8,800 on a $220,000 home. My friend, who owns THREE rental properties, says she has to budget a minimum of 3% of the value of each house.)
3. Mortgage interest (the bigger the down payment we can save up, the less interest we'll pay)
4. Home insurance (we already pay rental insurance, but home insurance will definitely be more expensive)
5. Real estate and legal fees ("If you sell your home for $220,000, you can look at paying about $13,200 in commission." The seller pays both his own agent AND the buyer's agent's commission.)
6. Lawn care and snow removal (if we don't do it ourselves. And if we do decide to take care of it ourselves it means more evenings and weekends spent at home and less time doing things we like.)
7. CMHC insurance (if we don't have a 20% down payment)

"Renting also allows you to live downtown in a city where the only homes you can afford are an hour's commute away."

"Here are a few ways to tell whether a home purchase makes sense in today's market:

* The monthly cost of carrying your mortgage and other debts plus your monthly share of property taxes and heating is markedly lower than the maximum 40 per cent of gross monthly household income permitted by lenders.
* You have discussed with your lender how much your payments would be if interest rates rise either a little or a lot in the next several years, and you are comfortable with the results.
* You've got a good start on saving for retirement and can foresee being able to make at least modest contributions in your early years as a homeowner.
* If you have kids, you're able to regularly put money away in a registered education savings plan.
* You have a plan for finding the money to furnish your new home, take family trips and cover emergency expenses without going into debt."

"Let's say you're 30 and buying a home (people are doing everything later these days, which seems reasonable because they'll live longer). With a 30-year amortization, you'll be mortgage-free in a little less than 26 years if you pay on an accelerated biweekly schedule and don't make any lump-sum payments. That gives you just nine mortgage-free years before retirement to help your kids pay for college or university and top up your savings."

(From another Globe and Mail article:

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