Foreward:

This article can offer some interesting food for thought for all of us property owners that are looking to *somehow* unload a rental property or two.   I've tried selling over the past year; unfortunately, with the 'perfect storm' that 2008-2009 brought with low property values and upside-down mortgage balances, selling wasn't the best option.  Now that things in Calgary have more or less balanced out, selling may be an option... If you currently have renters in your investment properties and they're forever singing the "I want to break the rent cycle" song, wouldn't it be nice to be able to have some "conversational ammo" on your side as you offer them an RTO option or option to purchase?

Hopefully this walkthrough can offer you and your renters some insight to help you close that sale!

To your growth and success,   James C. Tworek
Partner, Director of Corporate Development
Trimor Home Finance
www.trimormoney.com
www.calgarymortgageblog.ca
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Working as a team of professionals in the Canadian Mortgage industry, we come across this quandry frequently – a large portion of the clients we serve are First-Time Homebuyers.  Surprisingly, we also get asked this question frequently enough by clients that are already own a home, but maybe in another city or country but are here in Calgary on an extended contract.

There is definitely a ‘strike point’ where owning makes more sense than renting.

Logically, there are a variety of economic factors that play a role in the decision-making process of purchasing a home. The current economic climate, job security, real estate values, mortgage lending policies and interest rates all fluctuate and right now may either be the ‘best’ time for you to purchase or it may genuinely be the best time to wait.

Why Rent?

It would seem that there are many advantages to renting… You aren’t tied down to one location (you can move homes and from city to city when you want or need to); you don’t have maintain the property for any defects or wear and tear; you don’t have to pay property taxes; in certain economic circumstances, you may actually be able to rent for about the same (and sometimes cheaper) than if you owned your home. This site has done a great job at providing a great volume of information about the pros and cons of the two options.  One of the largest trade-offs of renting versus buying a home is that the longer that you rent, you will find that the ‘benefits’ of renting are mostly short-term and that the true ‘value’ of them diminishes over time as your lifestyle, family situation and economic situation change.   If you were to conservatively assume that the Real Estate market will appreciate in value moderately (3-4%) over a 5-6 year window, the long-term financial advantages of owning your home will likely work out to your favour.

Eventually, every renter should ‘crunch the numbers’ in order to see whether it is to is it better to rent a home or is it more cost effective to buy one.  We as professional Mortgage Specialists do this frequently with our First-Time Homebuyer clients in order to highlight and contrast the inherent value of one option or the other.  There are many factors to consider, however the decision over to whether to rent or buy will largely be a personal one.

Unfortunately, from a mortgage lender’s perspective, owning your own home isn’t a right – it’s a rite of passage.  The main things that lenders want to see when a prospective borrower is applying for a mortgage are: stable employment, having been able to establish a savings pattern well enough to save up a downpayment and maintaining your credit rating responsibly.  With all three of these criteria in line, a mortgage lender will see that you’re responsible and ‘financially fit’ to take the jump into home ownership. Now: even if you’ve got these three main ‘pillars’ of financial responsibility in line… does owning a home make sense for you?

Why own?

People who decide to buy a house get the opportunity to accumulate equity by paying down principal and also through possible real estate appreciation.  As seen over the past 5-6 years in Alberta, we went through a ‘boom’ economy that led to the Real Estate market appreciating rapidly: Many property owners were blown away with the gains that Real Estate yielded during that time period.  Along with the ups come the downs, and 2008-2009 was a very difficult time for many homeowners, Real Estate investors, Realtors, Developers and other in closely-related fields.  It would seem that we’re now on our way out of the recession of the past two years and brighter days are ahead.  These more financially-based factors aside, the other appeal in buying your own home comes from the pride that comes with owning your own property and the freedom that you have to make changes (renovations, landscaping) where desired.

Your personal financial circumstances and the current state of the market will determine whether it is more cost effective for you to buy or rent. CMHC, the Government of Canada’s mortgage insurance corporation, has put together a series of excellent quick-grab videos to help you walk through the ins and outs of the homebuying process.   If you would like to perform an analysis of ‘rent vs buy’, Genworth Canada has a great little calculator right here for your number-crunching needs.  In addition, we’re always happy to consult with you on the phone or face-to-face in order to help walk through the ins and outs.

Purchasing a home

Haven’t bought a home yet?  What are the factors preventing you from taking the plunge? Some common stories that we hear are:

-          Credit?

-          Job Stability?

-          Lack of downpayment?

-          Permanent or Legal immigration status?

-          Haven’t filed your taxes?

-          Too Busy?

-          Don’t like going to the bank?

-          Self-employed?

-          Bank said ‘no’?

We as mortgage brokers can help answer your questions about these topics as well as show you how the many mortgage products that are available across Canada to meet your home buying needs. Drop us a line and we’d be happy to help!

Ultimately, the largest points to consider when thinking about buying a house are your personal long-term goals and lifestyle. If you feel happiest renting and not having the pressure of having to maintain a property then this will probably be the correct move for you.

Helping you break the rent cycle and meet your home ownership goals,

James C. Tworek and The Trimor team!

www.trimormoney.com

www.calgarymortgageblog.ca