Thursday, March 11, 2010

Renting vs. Buying a House

Renting vs. Buying a House

Am I better off renting or buying a house? - This is a very old question. Before you decide, you need to answer the following:
1. How often do you expect to move in the future?
More than once a year
Once every two years
Not for at least 5 years
If you expect to be moving a lot (every couple of years or more) then you probably shouldn't buy your own home. Every time you buy or sell a home you incur significant costs (selling commissions alone average 6 %). Unless you get lucky and the value of the home you purchased goes up by at least 10 %, you'll be losing money.2. How stable is you employment situation?
Very stable
Probably stable
Not stable at all If your employment is not stable, you probably shouldn't be considering buying your own home. Home ownership requires a number of regular payments – the mortgage, property taxes, utilities, maintenance, insurance, etc. Missing any of these payments can trigger dire consequences for a homeowner. Until your employment is stable, your answer to the renting vs. buying a house question should be "renting".3. How much can you afford to pay for housing?
To answer this question you need to prepare a detailed monthly household budgeting plan. As a guide, most mortgage companies will only allow your housing costs to equal 33% of your gross income. Housing costs may include your rent or mortgage payment, property taxes, utilities, and 50% of condo fees if applicable. In addition, if your total debt servicing costs (housing costs plus all of your other monthly debt payments) exceed 40% of your gross income you won't qualify for a mortgage.As a guide, how much rent are you paying now? What is the maximum amount you are willing to pay?4. Are you able to save money every month?
Once again, we need to take a look at your budget. As a renter, are you able to save money every month? How much do you currently have in your savings? If you buy a home its important to have some money set aside for "emergencies". You may not be able to save as much money as a homeowner as you did when you were renting, but its important that you leave some room in your budget to save something. If you have to stretch your budget to the point that there is no room for any savings, you are probably stretching your budget too far and you should definitely reconsider your home purchase.5. Is it important to you to own your home?
Some would argue that this is the first question you should ask yourself. Another way to phrase it might be, "how badly do you want to own your home?" Home ownership, like everything else, is a matter of choice. Only you can decide whether or not home ownership is important to you. People born in the '60s or earlier, had home ownership drilled into them – to be a real person you had to own your home. Today, that's not necessarily true.Take a look at your budget (again). If home ownership is important to you then you may want to re-assess how you spend your money every month. For example, perhaps your budget includes going to the movies once per week. If you really want to buy that home, you may have to change your spending habits and only see one movie a month. Maybe you have to quit that health club, or buy fewer trading cards.The point we're trying to make is that you have the ability to decide what's important and what's not. If buying a home is important to you, you may need to limit some of the other things that you do.
6. Finally - here's the math
Let's compare the rental of a townhouse versus the purchase of the same townhouse.The rental example: 1000 square feet, you pay your own utilities. The rental charge is $850 per month and utilities on average cost another $150.To purchase the same house: selling price $90,000, mortgage at 8%, with a 10% down payment, property taxes of $100 per month, condo fees of $150 per month, utilities are the same as above.

Rent $850.00 --
Mortgage -- $640.00
Condo Fee -- $150.00
Property Taxes -- $100
Utilities $150.00 $150.00
TOTAL $1,000.00 $1,040.00
On the surface, it looks like there's very little difference between renting and buying a house, but the model only shows half of the picture.As a renter, you aren't responsible for maintenance. As a homeowner, you are. Depending on the age of the home and the type of features that it has, maintenance can be minimal or significant. Generally, the older the home, the higher the maintenance. A good rule of thumb is to estimate maintenance costs to be 2% of the value of the home value per year. In this example that would be $1,800 (2% of $90,000) or another $150 per month.In addition, when you buy, there are "closing costs" that have to be paid. They include legal fees, land transfer taxes, and other miscellaneous expenses that you don't pay if you are renting. A good rule of thumb is to assume 5% of the purchase price on the home. In our example that would be $4,500 (5% of $90,000).And finally, when you buy a home you need to make an initial down payment. In our example we used 10% or $9,000. If you remained a renter, that $9,000 plus the $4,500 you paid in closing costs could be invested and earn income. At a conservative rate of 7% per year, the $13,500 would produce $945 per year or $78.75 per month in interest income.
On the positive side, when you buy a home, a portion of your mortgage payment goes to pay-down your mortgage, increasing the percentage of your home that you own. In our example, in the first year of home ownership your mortgage payments would total $7,680, of which about $1,000 would go towards reducing the mortgage. The rest ($6,680) represents interest – the cost of borrowing the money to buy your home.
Lets revisit our example:


Rent $850.00 --
Mortgage -- $640.00
Condo Fee -- $150.00
Property Taxes -- $100
Utilities $150.00 $150.00
Maintenance -- $150.00
Cash outlay per month $1,000.00 $1,190.00
nvestments ($79.00) --
Increased Equity -- ($83)
TOTAL $921.00 $1,107.00

The cash outlay line is the one that's most important – it represents the payments you will have to budget for every month. In our example, it costs you about 20% more per month to own your home. If the interest rate of our mortgage was higher, say 10% then it would have been 30% more. Similarly, if interest rates were lower, say 6%, it would have been only 10% more.
Let's summarize. From a purely financial standpoint, whether you should rent or buy comes down to your monthly budget and the cost of borrowing. If you have the down payment and interest rates are 5% or lower, it makes very little difference whether you rent or buy. At interest rates above 8%, buying will cost you 20% or more than renting.
Assuming that you can afford the increased costs of owning your home, the question of what's better, renting or buying a house, again becomes one of personal preference. There is a certain satisfaction in owning your own home, but only if it's important to you. Take the time to read through our first 5 questions again. This a big decision and it shouldn't be made hastily.

Canadian House prices on steady rise

Canadian House prices on steady rise

Canada's New Housing Price Index rose 0.4 per cent for the third straight month in January. Year over year, the New Housing Price Index was up 0.1 per cent in January, the first year-over-year increase since December 2008.

Statistics Canada reports St. John's, N.L., led the way at 1.7 per cent growth, followed by Winnipeg (0.7), and Toronto and Oshawa (0.6). Ottawa–Gatineau, Saskatoon and Calgary all registered 0.5 per cent increases. The largest monthly decrease in new housing prices was recorded in St. Catharines–Niagara, at a 0.4 per cent drop. Charlottetown as well as Saint John, Fredericton and Moncton, N.B., all registered 0.2 per cent declines. Year over year, the New Housing Price Index was up 0.1 per cent in January, the first year-over-year increase since December 2008. - The Globe and Mail

Wednesday, October 7, 2009

Third Quarter Residential Unit Sales Up from 2008 by Shah Ahmed-Remax Saskatoon-3063412739

The real estate market in Saskatoon and surrounding area was brisk in the month September. REALTORS® assisted 351 homebuyers in the purchase of a home, that number up 43% from September 2008 when 242 homes were sold. The residential year to date unit sales number stands at 3,048 up 3% from 2008 when 2,996 homes exchanged hands.

The average residential selling price in September was $279,457.00 that number down 6% from September 2008 indicating more activity in the low to middle price range homes. The average selling price has remained steady throughout 2009 beginning in January at $278,545.00 reaching a high in July of $283,871.00. The strongest sales activity remains in the $300 to $350,000.00 dollar price range.

The average residential price is derived by taking the month’s dollar volume of homes sold and dividing that number by the unit sales number. The percentage of change should not be used unilaterally as prices vary from area to area. Consumers wishing an accurate estimate of value for their home should contact a REALTOR® member to do a comparative market analysis.

REALTORS® sold $ 98,089,304.00 of residential real estate in the month of September up 34% from 2008. Year to date dollar volume stands at $848,202,479.00. Listing inventory continued to correct with fewer properties being listed and more current inventory being sold. REALTORS® placed 516 properties on the market in September that number down 37% from September 2008 when REALTORS® listed 825 homes. Home buyers had 1097 properties to choose from at the end of September.

Sales activity in surrounding communities remained strong with 119 homes being sold up 65% from September 2008 when 72 homes exchanged hands. The average selling price was $271,401.00 up 18% from September 2008 when the average selling price was $229,271.00.

Similar sales activity is expected to remain throughout the four the quarter of 2009. Market stability will continue to improve as inventory levels decline. The resale and new home market are being fueled by low interest rates, product availability and consumer optimism in the local economy.

Harry H. Janzen, CAE

Executive Officer

Saskatoon Region Association of REALTORS®

Sunday, September 20, 2009

Should I Purchase My Home Now or Wait for the Market to Stabilize? Shah Ahmed Remax Saskatoon

Should I Purchase My Home Now or Wait for the Market to Stabilize?

Many people are debating whether they want to buy a property now or whether they should wait. They are getting mixed messages from the media about the market conditions and the state of the economy. Reports are indicating that the real estate market is rebounding. However, we are still hearing negative news about businesses folding and job losses. So is now a good time to buy?

The decision whether to buy a home now or wait is very tricky at the moment. On the one hand you have very low mortgage rates as the Bank of Canada had cut the interest rate several times in the last few months to try and get the banks lending again. Deals as low as 2.75% are being advertised to entice new customers into the market and get the chain moving again. Also, property prices have dropped in the last year and there are many good deals to be made.

On the other hand, there is still the question whether housing market prices will hold or drop further. Potential buyers are wary about taking on such a huge borrowing to find that the dream house they have just bought may be worth appreciatively less in six months’ time.

House prices are cyclical. A low market is always a good time to buy even though it may be several years before the market rebounds. The property market will rebound. If you are in a position to buy a house and can afford the repayments, buy now. Waiting to buy could result in paying much higher prices in a rising market.

Are you really ready?

It is also important to consider how long you will be in the home that you are about to purchase. Once you buy the home, it may be very difficult to resell right now. If the market continues to drop and you end up moving and selling in a year, you may have been wiser to wait a bit longer. So that is something that you want to make sure that you consider when making the decision to purchase a home.

Of course, if you have a long-term plan to be in the home, the fluctuations and potential decrease in value in the near term doesn’t need to get you down, as the only price that matters is the price you are able to sell for when you need or want to move.

Another thing that you need to think about is if you can afford the home that you are considering buying. While prices have dropped recently, you want to make sure that you find a home that is going to fit your budget. As a precautionary measure you should also budget for the fact that the cost of living might rise even further, and that being able to afford these increases will be important.

If you have the funds available for a down payment and you are eligible for a mortgage, and feel comfortable about your job security, and currently meeting the rising costs of living fairly easily; then the time is probably right for purchasing property. It is still a buyer’s market, so find your dream home, negotiate your best deal and jump in. Buying property now is one of the best times in the last hundred years to get a bargain.

Tuesday, September 8, 2009

Saskatoon Real Estate, Saskatoon homes. Saskatoon Houses for sale

Shah has been selling Saskatoon Real Estate. Experienced in all aspects of residential Real Estate and offers consistent, top quality service to my clients.So whether you are planning on buying your first home or selling your existing home, I believe on working hard with the heart. Specialized in Residential Homes,

Wondering about the price of the house, You like to buy or sell. Call first to ShahAhmed for Saskatoon & Area. 3063412739

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Basement developments.

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