Pattie Lovett-Reid: Renting versus owning your home
Mortgages Professionals Canada has made the case for home ownership in a new report.
In the report released Tuesday, Will Dunning, Mortgage Professionals Canada’s chief economist, compared the expected costs of housing for Canadian renters versus homeowners by extensively reviewing 266 scenarios, taken across a broad section of regions throughout Canada.
It found the monthly cost of homeownership is lower than the cost of renting equivalent housing in the majority of cases and becomes even more cost effective over time.
For many, the challenge isn’t the monthly payments, it is securing the down payment. Given the struggle, Canadians are getting used to the idea of never being able to own a home.
The numbers are compelling with rent continuing to rise, whereas mortgage payments especially over the first five years remain fixed.
Here are some key numbers from the report, comparing the cost of renting versus home ownership after 10 years.
- If mortgage rates remain at 3.25 per cent, after 10 years, the cost of home ownership will be lower than renting in 98 per cent of the cases
- If rates rise to 4.25 per cent, home ownership trumps in 92 per cent of the cases
- If rates are 5.25 per cent, ownership comes out on top 82 per cent of the time
So if home ownership is your dream, how do you come up with that down payment? Here are some steps you can take.
1. A 20 per cent down payment would be ideal for an uninsured mortgage but given today’s housing market at five per cent down and insured may be the way to do it.
2. Cut out the luxuries and discretionary spending and put the money in a TFSA
3. If you have been financially savvy and tucked some money away for the future in your RRSP, the Home Buyer’s Plan may come in handy
4. Liquidate your assets, pool your assets.
5. It is possible to borrow the five per cent for your down payment by way of a personal loan or line of credit. There will be some restrictions and a co-signer might help.
6. Talk to your parents about an advance of potential money flowing through their estate down the road. Or even a gift or possibly a loan
7. Pick up a side hustle
8. Move back home with your parents and save aggressively
9. Delay the home purchase but don’t abandon the dream.