Housing costs are currently lower for homeowners—on average—compared to renters!
Peppy here is enjoying his new home rather than renting. Like me, he is biased and thinks that it is a good time to look into homeownership. (Seems he loves doggie treats).
Here’s Why Owning a Home is Worth It!
- When you own your home, you add equity for your loved ones. (Equity is just a way of saying the money that is yours over time after the payments are made).
- Say you were in a house for the last 5 years, 10 years, 15 years, the equity in your home can be used in financing retirement, buying more real estate, investing in the stock market, etc.
- In the early 80’s, the prime rate was 18%. Peppy didn’t think much of that, but Peppy’s ears perked up when he realized that the rate at which money that can be borrowed commercially (the prime rate) is 2%, making mortgages more accessible.
- Also, you might have noticed with continued immigration and low vacancy rates, renting was becoming less feasible. Below you will find out more about why you should consider homeownership.
There are some things Peppy and I would like you to know that will help you on your journey of owning a home of your own.
Please read the article below and enjoy! Hope you had a good autumn weekend. The trees are at peak colour in Algonquin right now. Consider a day trip there. If you go, buy a park pass online because visitor numbers are being controlled this year.
Martin Charney, B Comm.
(416) 524 5518
Alpha House Mortgage Corporation Lic 10226
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Despite higher home prices and larger mortgages, monthly housing costs are currently lower for homeowners—on average—compared to renters!
In fact, in the second quarter of this year, homeowners paid on average $769 less per month compared to renting an equivalent dwelling, according to a new survey sponsored by Royal LePage.
“For those who are able to secure a sufficient down payment, it is more financially beneficial to buy a home in Canada than to rent over the long term, in 91% of cases analyzed,” reads a release from Royal LePage. The cases analyzed assumed the borrower was able to put down a 20% down payment.
“Historically, homeownership has been very profitable for Canadians, many of whom have factored their real estate investments into their retirement planning,” Karen Yolevski, chief operating officer at Royal LePage Real Estate Services Ltd., said in a release. “Owning a home is widely viewed as a means to save money and build equity.”
More than 270 scenarios were analyzed by survey author Will Dunning, president of Will Dunning Inc. “This research tests a belief that is held by a lot of Canadians, that owning is better financially than renting,” Dunning said, “And, [the research] finds that this belief is very often correct.”
While most of today’s buyers count on home price appreciation, the study found that even if there was no growth in home values, homeownership would result in a positive rate of return on investment in most cases.
The total monthly costs for owning a home may be more than renting, but one factor that gives the edge to homeowners is the equity that’s accumulated with each mortgage payment.
The principal portion of each monthly payment can be considered a form of forced saving.
Today’s Homeowners Building Equity Faster Than Ever!
Despite record-high home prices, historically low mortgage rates are still allowing today’s homeowners to pay down their mortgages faster than ever.
At today’s rates, more than 60% of an average borrower’s first mortgage payment goes towards the principal, according to data from Edge Realty Analytics.
This means that at prevailing rates, today’s new buyer will have paid off at least 16% of their mortgage within the first five years.
Comparatively, for homeowners in the 1980’s, five years of mortgage payments resulted in just 3.8% of their mortgage being paid down.
The Royal LePage analysis included all costs associated with buying and selling a home– closing costs, fees for lawyers and real estate agents and land transfer taxes. It also took into consideration ongoing costs, such as utilities, repairs, homeowners’ insurance and condo fees.
The scenarios tested included a mortgage renewal at a higher interest rate of 3.64% in five years. “Even in that scenario, homeownership is expected to remain more affordable than renting, in most situations,” the analysis found.
Please contact me if you need further information on homeownership or the prevailing mortgage rate.
Martin Charney, B Comm.
(416) 524 5518
Alpha House Mortgage Corporation Lic 10226