Seeking advice on real estate investment journey
Member since 2023 · 6 posts · 1 vote
Seeking advice on real estate investment journey
7 Replies
- 2yTheresa HarrisPro MemberMember since 2019 · 15k+ posts · 11k+ votes
Canada is different than the US for mortgages (and within Canada there are difference among the provinces as well).
First time home buyers can buy a place with 5% down (if they are living in the home). If you do 5% down, you also have CMHC insurance which adds up quickly. Mortgages in Canada come with different terms (eg 1 yr, 2 yr, 5 yr) and fixed and variable rate mortgages. For the amortization period, go as long as you can (often 30 years) as that will lower your payments. In 3-4 years, you will not have a lot of equity in the home, so I'm not sure you'd want to refinance (if you plan on trying that, talk the bank because ending your mortgage before the term is up (ie 1 yr, 2 yr) comes with a heavy interest penalty (basically you have to pay out all of the interest remaining for the rest of that term).
As for renting vs investing elsewhere-run the numbers as to what your payments would be if you bought a house including insurance and property taxes and repairs vs renting. Then what is the difference and if you put that money elsewhere, how much would you make?
Eg if owning a house for the mortgage, insurance and taxes alone would cost you over $3000 a month (mortgage alone on a 25 year amortization for $500K is $3000 a month, goes down to $2700 on a 30 yr mortgage). If you rented, how much would that cost you each month? Toronto is expensive, so guessing it might be close to that. I'm also not sure if you could buy a house for $500K. A condo, yes in which case you also need to add in condo fees.
- Member since 2023 · 6 posts · 1 vote2y
Quote from @Theresa Harris:
Canada is different than the US for mortgages (and within Canada there are difference among the provinces as well).
First time home buyers can buy a place with 5% down (if they are living in the home). If you do 5% down, you also have CMHC insurance which adds up quickly. Mortgages in Canada come with different terms (eg 1 yr, 2 yr, 5 yr) and fixed and variable rate mortgages. For the amortization period, go as long as you can (often 30 years) as that will lower your payments. In 3-4 years, you will not have a lot of equity in the home, so I'm not sure you'd want to refinance (if you plan on trying that, talk the bank because ending your mortgage before the term is up (ie 1 yr, 2 yr) comes with a heavy interest penalty (basically you have to pay out all of the interest remaining for the rest of that term).
As for renting vs investing elsewhere-run the numbers as to what your payments would be if you bought a house including insurance and property taxes and repairs vs renting. Then what is the difference and if you put that money elsewhere, how much would you make?
Eg if owning a house for the mortgage, insurance and taxes alone would cost you over $3000 a month (mortgage alone on a 25 year amortization for $500K is $3000 a month, goes down to $2700 on a 30 yr mortgage). If you rented, how much would that cost you each month? Toronto is expensive, so guessing it might be close to that. I'm also not sure if you could buy a house for $500K. A condo, yes in which case you also need to add in condo fees.
Thanks for the response. I meant condo (I should have been clearer). I pay around 2400 as rent and I've calculated my monthly expenses will be around 3700 if I buy a condo. Currently I can purchase a 550K condo in Toronto with 10% down payment (I am able to save around 30K in a year).
- 2yEric DeNardoPro MemberReal Estate Agent · Denver · Member since 2020 · 366 posts · 151 votes
Think about house hacking. Where you rent out other rooms, or find a home that you might have a mother-in-law unit that you can rent out and have more privacy. That way you can build equity, rather than paying rent, and save more money since someone else is paying you rent.
- 2yTheresa HarrisPro MemberMember since 2019 · 15k+ posts · 11k+ votes
Quote from @Nimit Gupta:
Quote from @Theresa Harris:
Canada is different than the US for mortgages (and within Canada there are difference among the provinces as well).
First time home buyers can buy a place with 5% down (if they are living in the home). If you do 5% down, you also have CMHC insurance which adds up quickly. Mortgages in Canada come with different terms (eg 1 yr, 2 yr, 5 yr) and fixed and variable rate mortgages. For the amortization period, go as long as you can (often 30 years) as that will lower your payments. In 3-4 years, you will not have a lot of equity in the home, so I'm not sure you'd want to refinance (if you plan on trying that, talk the bank because ending your mortgage before the term is up (ie 1 yr, 2 yr) comes with a heavy interest penalty (basically you have to pay out all of the interest remaining for the rest of that term).
As for renting vs investing elsewhere-run the numbers as to what your payments would be if you bought a house including insurance and property taxes and repairs vs renting. Then what is the difference and if you put that money elsewhere, how much would you make?
Eg if owning a house for the mortgage, insurance and taxes alone would cost you over $3000 a month (mortgage alone on a 25 year amortization for $500K is $3000 a month, goes down to $2700 on a 30 yr mortgage). If you rented, how much would that cost you each month? Toronto is expensive, so guessing it might be close to that. I'm also not sure if you could buy a house for $500K. A condo, yes in which case you also need to add in condo fees.
Thanks for the response. I meant condo (I should have been clearer). I pay around 2400 as rent and I've calculated my monthly expenses will be around 3700 if I buy a condo. Currently I can purchase a 550K condo in Toronto with 10% down payment (I am able to save around 30K in a year).
Other than over the long term building equity and stability, I don't see the benefit of your buying where you currently live. It would be at least $1300 a month more than renting, likely more because of repairs and maintenance. You could look at buying a house elsewhere and renting it out through a property manager. If you do, pay attention to where you buy. ON is very tenant friendly and I'd invest in another province.
- Member since 2024 · 13 posts · 6 votes2y
Lots of deeply discounted residential real-estate partnerships now for sale.
- 2yCody NeustaedterPro MemberReal Estate Agent · Winnipeg MB, Canada · Member since 2021 · 109 posts · 34 votes
Quote from @Nimit Gupta:
Quote from @Theresa Harris:
Canada is different than the US for mortgages (and within Canada there are difference among the provinces as well).
First time home buyers can buy a place with 5% down (if they are living in the home). If you do 5% down, you also have CMHC insurance which adds up quickly. Mortgages in Canada come with different terms (eg 1 yr, 2 yr, 5 yr) and fixed and variable rate mortgages. For the amortization period, go as long as you can (often 30 years) as that will lower your payments. In 3-4 years, you will not have a lot of equity in the home, so I'm not sure you'd want to refinance (if you plan on trying that, talk the bank because ending your mortgage before the term is up (ie 1 yr, 2 yr) comes with a heavy interest penalty (basically you have to pay out all of the interest remaining for the rest of that term).
As for renting vs investing elsewhere-run the numbers as to what your payments would be if you bought a house including insurance and property taxes and repairs vs renting. Then what is the difference and if you put that money elsewhere, how much would you make?
Eg if owning a house for the mortgage, insurance and taxes alone would cost you over $3000 a month (mortgage alone on a 25 year amortization for $500K is $3000 a month, goes down to $2700 on a 30 yr mortgage). If you rented, how much would that cost you each month? Toronto is expensive, so guessing it might be close to that. I'm also not sure if you could buy a house for $500K. A condo, yes in which case you also need to add in condo fees.
Thanks for the response. I meant condo (I should have been clearer). I pay around 2400 as rent and I've calculated my monthly expenses will be around 3700 if I buy a condo. Currently I can purchase a 550K condo in Toronto with 10% down payment (I am able to save around 30K in a year).
Are you able to buy a 2+ bedroom condo and rent out one of the rooms for 1300/month or more. Seems unlikely to me but you are most likely better off investing your $60k into other markets if you can't house hack.
- 2yWale LawalBusiness MemberReal Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
When thinking about owning a home, look at your plans, money, and the housing market. Think about getting your first house with just 10% down. This way, you start to own more of your house over time and have a stable place. Or, keep renting and put your money in other places to grow. Spread out your investments and save more for a bigger first payment. Mix buying a home, saving money, putting money in different spots, and possibly getting a better loan deal to stand in a good spot after 5 years.
Good luck!
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