For many renters, owning a home is a lifelong goal.
But is buying a home still a good bet?
If you have ever wondered whether you are further ahead
owning or renting, you're not alone. There are advantages and disadvantages to
both. The right information can make all the difference. To help you decide, consider
these facts....
A basic rule of thumb is that you should buy if you
plan to be your home long enough for price appreciation to cover buying and selling
costs. Otherwise, you should rent.
Renting makes sense for households, no matter what
the income level if there are frequent job changes and moves to new locations
or if you are in a life transition such as divorce.
Renting may also be a good option if the local economy
is very poor and forecast to get much worse. In these cases renting offers flexibility,
since you can pick up and move with just a month or two notice. We have seen just
such an economy recently in the lower mainland, however, in the past few months
it is the consensus of most economists that we have hit the bottom and are moving
up. House prices have already started to creep up and along with lower interest
rates, the sales activity for apartments, townhomes and detached homes have increased
substantially as serious buyers are making the decision to buy their own home.
If you are not in a life transition and plan to stay
with your job, buying a home makes more sense. Here's why...
- Renters pay rent than increases at the rate of inflation.
That means the cost of renting rarely decreases. As well, rent cannot be recovered.
Rent once paid, is gone!
- On the other hand, when someone buys a home, each
mortgage payment increases equity, since at least some of the principal, even
in the early years, is paid. Over time homeowners pay less and less, since mortgage
payments and inflation decrease the amount of principal oweing. Equity is important
since banks will let you borrow against it, which provides you with a realiable
source of emergency funding.
- Buying a home also offers capital gain. While the
real estate market does fluctuate, house prices increase over the long term.
A single family detached home in the Vancouver area
bought for $57,000 in 1975, is now worth well over $300,000.
Buying a home gives increased privacy and control over
living space. There are no lanlords to satisfy and you can paint or remodel whenever
you like. If you decide to sell, you can usually recover any improvement and maintenance
costs, since they add to or maintain the value of your home.
Housing is a necessity. We all have to live somewhere.
Since you are already spending money on housing, you ought to be able to reap
the rewards instead of your landlord. The best way is through home ownership.
NOW is a great time for you to take the plunge and
buy your first home.
'But I can't afford to buy!...'
You may be pleasantly surprised that you can afford
to buy after all!
Many people would like to start building equity in
their own home, but are held back by concerns about cost. In fact, the Canada
Mortgage & Housing Corporation estimated that 40 per cent of renters in Canada
today can afford to buy their own home. If affordable housing options are available
to so many renters, what's holding them back?
MEDIAN PRICE
A median is that price at which half the homes sold
for more while half sold for less. That means that there are just as many homes
that sold at a price lower than the median than those that sold at prices higher
than the median price. The median price doesn't give any indication of the spread
of these prices. Many properties are sold at much lower - and higher prices, of
course - than the median price.
AVERAGE PRICE
An average price is the total dollar volume of homes
sold for a particular period, divided by the number of units sold. Average prices
are typically reported for the sales activity in a given area for a given month,
quarter or year, and provide a snapshot of past activity. Average prices of properties
sold in the past give only a limited indication of what housing inventory for
sale is priced at today. An understanding of the housing in a particular community
is needed to put average prices into perspective. For example, sales of a new
sub-division or townhouse project of larger, upscale homes at higher prices will
bring the overall average price up, giving the impression that all housing prices
have risen, when in reality, prices for the older, smaller housing units in the
community may not have changed, or they may have even dropped.
AFFORDABILITY AND SELECTION
Attractive mortgage rates combined with affordability
and selection have made B.C. increasingly popular for buyers. A Realtor with experience
in the community in which you're interested in buying can provide a knowledgeable
market analysis and show you what is available within your budget. You may wel
find that you can afford that dream of home ownership after all.
Incentive Programs For Buyers
CHMC HOME LOAN INSURANCE ( 5% DOWN PROGRAM )
Under this program CMHC insures mortgages for 95% of
purchase price. The program is open to both first-time and previous buyers who
can manage the costs of home ownership and have a minimum down payment of 5% of
the purchase price.
RRSP HOME BUYERS' PLAN FOR FIRST-TIME BUYERS
Participants are eligible to withdraw a maximum $20,000
tax-free from his/her own RRSP for a down payment. Participants must be first-time
buyers, not have owned a home that has been used as a principal residence within
the last five years and must intend to occupy the home as a principal residence.
The minimum repayment schedule is 15 equal installments. The funds to be withdrawn
must have been invested into the RRSP for a minimum of 90 days prior to withdrawal.
PROPERTY TRANSFER TAX EXEMPTION FOR FIRST-TIME BUYERS
First-time buyers are exempt from the property transfer
tax (PPT). Normally PTT is 1% on the first $200,000 and 2% on the balance. To
qualify, a buyer must not have owned an interest in a principal residence anywhere.
The purchaser must be Canadian citizen or permanent resident and have resided
in B.C. for a minimum of 12 months prior to the purchase or transfer. The exemption
is subject to a maximum purchase price depending on location in the province.
Mortgage financing must be 70% or greater of the purchase price and there are
limits to the amount that the mortgage can be paid down in the first year. The
property must be an owner-occupied principal residence.
Summary
- Property purchase tax rebate is for 1st time buyers
who purchase no higher than $300,000 and put less than 30% down at purchase and
no more than $11,000 onto the principle in the 1st year.
- First time buyers may use $20,000 of their RRSP's
tax free as long as they have held them for 90 days. If the buyer is buying with
someone who has already owned, the rules may change.
- Miniumum down payment for Revenue Property is 25%
(although 15% can sometimes be done).
-
Provincial home owners grant is $470.00/yr, if owner
occupied.
