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 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
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.