Today’s low interest rates have encouraged
many renters to become homeowners: the lower the mortgage rates,
the lower the monthly payments, and the greater the chance that
your mortgage payments will be less than your rental payments,
especially in larger cities.
From a strict cash flow stand-point, you may
find renting less costly than owning due to the additional costs
of home owner-ship such as taxes, maintenance and utilities.
However, unlike renting, home ownership is a form of investment.
Consider the fact that the average home in Canada would have
cost $76,518* in 1983.
In January 2006, that same home was valued at
about $258,275* – a significant increase in value.
According to a recent RBC Royal Bank study
conducted in January 2006 by Ipsos Reid, 90% of Canadians view
their home as a good investment.
"There’s a definite consensus among Canadians
when it comes to the financial benefits of owning a home," says
Catherine Adams, RBC Royal Bank’s vice president, Home
Equity Finan-cing. "In fact, the average home owner estimates
that his or her home has gone up 18 per cent in value over the
last two years."
Also, purchasing a home is a forced saving.
You keep building equity year after year, versus just paying
rent. And you can build up sizeable equity in just 10 years.
That’s money you can access when you sell the home, or equity
that you can use to ‘borrow against’ to reach other goals later
in life, such as a child’s post secondary education, a vacation
property, or travel.
The no down payment option
With interest rates starting to creep up,
many first-time home-buyers want to get into the market right
away, but haven’t been able to save the 5% down payment. Despite
your good cash flow and excellent credit, saving for that
required down payment is tough.
To help you buy your first home sooner, look
for a No Down Payment Mortgage. Some allow you to borrow
95% of the appraised property value or purchase price of your
new home – whichever is less.
This innovative solution then provides you
with 5% cash back when you take a 5-year fixed rate mortgage.
That cash back is used to cover the required 5% down payment.
All you need is 1.5% of the purchase price to
cover closing costs.
"This is a good time to get into the housing
market, but many people who can handle the payments just don’t
have the necessary five per cent saved for a down payment," said
Catherine Adams. "This option will allow them to get in on the
housing market sooner, rather than waiting on the sidelines
while housing prices, and possibly interest rates, begin to
escalate."
* Source: Canadian Real Estate Association (crea).
