Does renting really make sense in today's real estate market?

The idea of paying someone else's mortgage and helping them build equity in their property really doesn't make a lot of good financial sense!  As a long term renter, you are literally throwing away tens of thousands of dollars of your hard earned money instead of creating a forced savings plan by way of having a mortgage.  I have chatted with many renters over the years and there are two primary reasons they typically give for not being a home owner. 

The first reason is they feel they can't afford a home or don't have a suitable down payment.  Interest rates are at a historical low so the bottom line is borrowing money for a home purchase has never been more affordable.  Many first time home buyers can qualify for a mortgage for as little as 5% down of their pre-approval amount.  Using the federal government's Home Buyers' plan you are able to use $25,000 in RRSP savings (or $50,000 per couple) as your down payment on a home.  You then have 15 years to repay those borrowed monies back into your RRSP. 

The second reason is they don't want the responsibility of having to maintain a home.  They would rather call their landlord up and have them be repair or replace whatever needs to be done.  The benefit of being a home owner is when you sell your primary residence at a profit (known as capital gains) it is tax free!  That's right you keep your profits to use towards another home purchase or whatever else you have in mind.

I recently asked Dave Vrabic of Mortgageopolis  a Kelowna,BC based mortgage broker to provided some current lending rates and monthly payments.  The monthly payments quoted here are based on a per $100,000 basis.  So as an example a $400,000 5 year variable, 35 yr amortized mortgage would be $328.30 x $400k = $1,313.20 per month (plus CMHC fees).

If you want to stop being a renter and start building equity in a home of your own then contact me today at (250) 808-7700 or email me at: c21guy@telus.net.

Sincerely,

Jason Neumann, REALTOR® 
Century 21 Assurance Realty Ltd.    
Cell: (250) 808-7700
Office: 1-888-301-2121
KelownaRealEstateNews.com

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Monthly Mortgage Payments for borrowing $100,000.00

Monthly Payment	Term	Amortization	Interest Rate	APR*
$469.31	5 year fixed	30 years	3.89%	4.17%
$366.73	5 year variable**	30 years	1.95%	2.27%
$434.35	5 year fixed**	35 years	3.89%	4.17%
$328.30	5 year variable	35 years	1.95%	2.27%

Subject to lender and CMHC approval.  Rates and Payments are subject to change without notice.  A pre-approval can guarantee your interest rate up to 120 days. 

* APR - Annual Percentage Rate.  A calculation which takes into consideration the interest rate in effect during the term of the mortgage together with costs associated with arranging the loan.

** The variable term is the lenders prime rate minus .30% for the term of the mortgage.  The prime rate can fluctuate from time to time throughout the term affecting the interest rate charged to the borrower.

CMHC Mortgage Insurance - Mandatory insurance premium which is added to the loan and paid by the borrower when less than 20% of the purchase price is used for a down payment.  Mortgage insurance insures the lenders money in case of default by the borrower.  The premiums for 30 and 35 year amortizations are 2.95% and 3.15% respectively calculated on the purchase price and based on fully qualifying applicants.