A few thoughts on Renting vs Buying (with Jacqueline Baker)

With interest rates still at historic lows, the housing market looks affordable for many families across Canada and yet far from reach for many others. Can you guess who? Rent vs Buy dice

As the old saying goes "the rich get richer and the poor get poorer" and here in Canada, it's the truth! It’s note surprising to learn that according to CMHC “a typical homeowner went from being 18 times wealthier than a typical renter household in 1999 to 24 times wealthier in 2005.”

In 1999 Canadian homeowners held 91% of total net wealth and renters held a mere 9%. These and many other reasons are why there is now a class of long-term or permanent renters who are stuck in this rat race from one generation to the next.Growth in home equity accounted for 61% of the increase in net worth from 2000-2009

This is also a major reason why many Canadians are waking up and thinking about home ownership! Owning your own home has remained a major asset for Canadian families and its equity the largest component of wealth formost.

Important Facts about Renters vs Home Owners in Canada

“We are spending way too much on consumer items!”

After so many years renting, some look at their situation and realize that the most valuable thing they own is their car or the latest mobile phone and usually have very little or no savings at all to put down on a house. 

To state the obvious: we are spending way too much on consumer items!Access to cheaper credit has led many to splurge on a new wardrobe, maybe a new home theatre, or both. Now there's nothing wrong with material possessions.

Here is the not-so-secret ingredient of the richer side of Canada: One of the largest contributors of their wealth - Equity!  The definition of ‘Equity’ according to Investopedia is "the difference between thecurrent market value of the property and the amount the owner still owes on the mortgage." 

So for those who are sick and tired of flushing money down the toilet every month on rent and feeling like you're not getting anywhere financially, now is the time to start thinking about becoming a home owner!

It's a simple cycle. A family buys their first home. Every month they pay down their mortgage. Over time real estate values go up.  And like any cycle, families grow, babies are born and they decide to sell their house.  The difference between what they owe and what they sell it for is their equity!I like nice things too, but when it puts people in a deep hole that they can't climb out of, it enslaves them to their debt! Meaning their possessions literally end up owning them. 

At some point someone has to say something and I will be the one to respectfully suggest - Stop wasting money you don't have on stuff you don't need and start saving up to buy a house!

Here are the four things I suggest for those who are eager to begin the home ownership journey:

1. Make a Financial Report Card!

Learn about money and learn how to make and understand a financial statement.  How will you know what to do if you don't know where you are?

2.  Learn how to pull your own credit report! 

Find out what the banks are saying about your credit history. You can do it online, ask me for details.  Lenders will look at your credit bureau when you want to get a mortgage, so it’s in your best interest to get familiar with your own credit history.

3. Talk to a mortgage advisor! 

The MyWestEndCondo has one - email Jacqueline at Jacqueline@mywestendcondo.com and learn what steps you will need to take to be Pre-Qualified!

4. Create a goal and write it down! 

It could be a specific amount of savings for a down payment or a certain amount of debt to be paid down.  Whatever it is, start working towards it so you can begin getting closer to home ownership and further away from being another statistic.

Craig Rushton, CENTURY 21 In Town Realty, 604.505.6503, www.craigrushton.com

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