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It is quite possible that if you bought a $200,000 house, you did not pay cash for your home. You may have taken out a mortgage. If you had put as much as twenty percent down - that would be an investment of $40,000.
At an appreciation rate of 5% annually, a $200,000 home would increase in value $10,000 during the first year. That means you earned $10,000 with an investment of $40,000. Your annual "return on investment" would be a whopping twenty-five percent.
Of course, you are making mortgage payments and paying property taxes, along with a couple of other costs. However, since the interest on your mortgage and your property taxes are both tax deductible, the government is essentially subsidizing your home purchase.
Your rate of return when buying a home is higher than most any other investment you could make.
Buying a home is the largest investment most people will make in their lifetime. Before embarking on your journey, take a moment to review the following tips. They will assist in making the process more efficient and take some of the stress out of home buying:
- Know how much you can afford. Why waste time looking at homes that are not in your price range?
- Determine your down payment. This will allow you to calculate how much you need to borrow and establish a price point.
- Get pre-qualified for a mortgage.
- Know where you want to live. Determine areas that best suit your needs.
- Decide what type of home you want to buy. There are a number of housing types available to today’s real estate consumers. Single-family detached homes are most popular, but there are also semi-detached homes, links, condominium apartments and townhouses, as well as co-ops from which to choose. Each has different characteristics that are more or less suited to individual lifestyles.
- Determine what you need in a home. How many bedrooms or bathrooms do you need? Is there enough parking for your car(s)?
- Visit www.remax.ca. The internet is a great starting point. It can help you to target properties that meet your criteria and eliminate those that are unsuitable.
- Choose a REALTOR®. Find and agent that you are comfortable with – someone you can trust and who understands your needs.
- Hire a home inspector. Your realtor can offer recommendations.
- Investigate alternatives available to you. Government incentives have been introduced to stimulate activity in housing markets across the country. Two of the programmes that are currently available – access to RRSPs for first time homebuyers and the CMHC’s five per cent down payment plan – help make homeownership more attainable for all Canadians.
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