# Is a home/mortgage a wise idea for me?



## Woody (Oct 30, 2012)

I know everyone's situation is different (Do you really want/need a home?) and I'm usually the first to advise people selling their lives basically for massive mortgages however I just wanted the advice of some seasoned homeowners (or maybe seasoned renters who oppose home-owning? ).

I just turned 24 and got the rather exciting news that my career will be keeping me here (In Halifax) for at least the next 4 years.

Situation:
Not married, 24 years old.
Currently employed as an engineer in the RCN with a salary ~$58k.
Bachelors Degree in Computer Science with NO student debt.
I have a Ford Ranger worth about $18k that I owe about $12k on.
Savings of about $5k.
Currently living in a fairly cushy apartment with live-in girlfriend (Who works retail) for $1000/month (I pay $600 plus $100 light and $40 internet, she pays $400)

Looking at:
There are currently homes in our area, great neighborhood and within a minutes drive to everything essential for sale.
Looking at an 8 year old 3 bedroom, 2.5 Bath 2 story with a fair size yard, garage and finished basement for $275k.
My girlfriend and I would both be supportive of renting the room out to one of our mutual friends who we have experience with living with before for around $350.
My employer would cover the $5000 CMHC mortgage insurance.

Would taking on such a large mortgage in this situation make sense? To me it always screamed no, but the longer I rent the more it feels like I'm throwing money into a fire that could be used to build up equity/something of value for myself. It also seems like given the current all-time low mortgage rates that it would be the best opportunity to get in now before they potentially rise (I know a lot of realtors are using this as their push/marketing statement, but it does have some logic). It also seems like given the market (Halifax), the quality and size of the house and the area that the price is reasonable enough not to plummet in case of another housing bubble.

Anyway, I'd love to hear your two cents whether its sobering criticism or words of encouragement.


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## MoneyGal (Apr 24, 2009)

Who is buying the house - you alone, or you and your girlfriend? Do you have plans to get legally married? Do you have a cohabitation agreement or do you plan on getting a prenup? Are you aware of the implications of buying a house with a person you are married to, in the case of a common-law marriage and a legal marriage? 

You have no real financial savings and vehicle debt. Your assets are mostly your future income, which you can't trade and are totally illiquid, and can only be monetized over time and with effort. Buying a house means that your financial savings over time, for the foreseeable future, will go into another non-tradeable, highly illiquid, very concentrated asset. 

Final comment: the message that "you should buy now before interest rates rise" is problematic. What do these realtors think will happen if interest rates rise? What might happen with housing prices? 

Just things to think about; I don't know whether these fall into the category of "sobering criticism" but they aren't words of encouragement, either.


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## dogcom (May 23, 2009)

Interest rates rising is the best thing to happen for someone looking to buy a home. You keep hearing people say they would like a correction to get in and rising interest rates can provide some great opportunities.


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## Woody (Oct 30, 2012)

MoneyGal said:


> Who is buying the house - you alone, or you and your girlfriend? Do you have plans to get legally married? Do you have a cohabitation agreement or do you plan on getting a prenup? Are you aware of the implications of buying a house with a person you are married to, in the case of a common-law marriage and a legal marriage?


Both of us having friends who ended up in horrible financial situations post-divorce we agreed from the get-go to sign a pre-nup if that time ever came. For now we have a cohabitation agreement.


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## Potato (Apr 3, 2009)

Thoughts from a renter:

One issue is your common-law (or soon to be so) wife: are you comfortable owning with her? 

Do you have any clarity beyond 4 years? I'm sure I've got a spreadsheet for it somewhere, but the old rule of thumb used to be to aim for at least 7 years between having to move if you own. If you do have to move in 4 years, with a negligible down payment you will not have enough equity to pay off the transaction fees, let alone make a down payment on the next house -- unless there is a big upswing in the local market, you will be trapped in that house. On interest rates, remember that your mortgage will reset at some point (most commonly in 5 years) so if rates do rise, you will pay them too... without the benefit of a lowered house price to go with it. 

You're not really comparing apples-to-apples situations, which suggests that you're not dying to move into a house -- if you would move, you'd have to pick up an extra body, whereas when renting you chose an apartment rather than a 3-bedroom house. So there's a cost to that kind of future-proofing/space-seeking, rather than waiting until you need/want 3 bedrooms of your own. Do you want to _rent _a 3-bedroom house with your other friend?

How much are you saving now? You only have $5k saved up, but is that because you just started? Owning a ~$275k house will cost you more than you're paying for that apartment now, even if you manage to rent out a bedroom. Are you saving that difference now? If so, that's where your equity is building up. If not, why not? A house can be a "forced savings" plan, but it's an extreme option compared to other strategies to increase your savings rate -- and if you're not saving it now, it means you're going to have to sacrifice something in your lifestyle to make the payments (i.e., you will be "house poor"). Plus you'll be at the mercy of your friend making rent and not deciding to buy a house of his/her own.


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## Woody (Oct 30, 2012)

Really appreciate the feedback! If you can't tell from my original post I was never sold on the idea of purchasing in my current situation, however I tend to get curious when presented with attractive options and need a bit of rational dialogue to get me back on track.


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## none (Jan 15, 2013)

Look at these Halifax housing stats (updated every Thursday). They suck.

http://www.halifaxrealestateblog.net/

Inventory is stacking up, the sale to list ration is falling rapidly - average price is still high but it's only a matter of time before prices start taking a serious hit with inventory like that.

Don't be in a rush to buy right now - save some more, rent a great place - the next year will be very telling. The ship building contract was WAAAy overblown and is somewhat responsible to the massive price inflation in halifax in the last year - it's ridiculous of course, the lack of first time home buyers is a larger hole of money.


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## hystat (Jun 18, 2010)

Woody said:


> will be keeping me here (In Halifax) for at least the next 4 years.


I wouldn't buy anything until you can say you are pretty sure you can spend a decade in the house. 
Houses are so expensive to get rid of. Selling it in 4 years will cost you at least $20,000. That's almost 2 years rent paid for. 

Wait and keep saving until you won't need CMHC.


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## meddlesomemarmots (Feb 16, 2011)

Pretty sound financial advise throughout the thread.

The income to property price ratio isn't too ridiculous - but the potential downpayment is a pretty poor equity base for a house. I'd defiantly be in the wait 2 or 3 years, save up some cash, see what your situation is personally/socially/professionally and then reassess the situation.


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## NotMe (Jan 10, 2011)

Since you asked, I'd take the money out of the equation and just look at you:

You're 24. That's really young to be tied down. A lot can happen in these years - it's not like your married with kids yet - you might want to change jobs; she might dump you for another guy (it happens to the best of us in our 20s ; basically so much can happen that I would never recommend home ownership in your early 20s, regardless of income to price ratios and the like.


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## Cal (Jun 17, 2009)

Keep renting, and keep saving.

You don't really have much money. What happens if you buy, then find out you need a new furnace or something. I know it is old fashioned, but save for your down payment.


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## Hawkdog (Oct 26, 2012)

What would the monthly mortgage payment be? versus what your paying in Rent?
If you paying 1500 in rent and you can get a mortgage for 1000 I go with mortgage.

If rent is cheaper and you are disciplined enough to sock away money then wait.


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## Spudd (Oct 11, 2011)

I think the main point here is that you only know you'll be there for 4 years. I've heard the rule of thumb is 5 years to be able to pay down enough equity to pay off the realtor costs when you want to sell it.


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## MoneyGal (Apr 24, 2009)

Yeah, and that's so you can nominally *break even*. 

If someone offered you an investment opportunity with those conditions, would it sound appealing?


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## Hawkdog (Oct 26, 2012)

Spudd said:


> I think the main point here is that you only know you'll be there for 4 years. I've heard the rule of thumb is 5 years to be able to pay down enough equity to pay off the realtor costs when you want to sell it.


Definitely, if you know you are only going to be there short term, renting is the best option.

Side note: Some companies will cover moving expenses and realtor fees if you relocate. Something to negotiate if you get a new job or relocate. This happened to us a few years back, bought a house for 97,000 - then about 6 years later my wife took a job with a different company - we sold the house for 167,000 (20,000 in renos) - and the new company paid the realtor fees and the moving company costs.


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## jserrg (Apr 17, 2013)

It also depends on who you are.
I remember myself: I wanted to have kids and get settled since I was 16 years old. So I bought a house as early as I could. Though it might have been a stretch. It was the first priority for me.

To pay mortgage on a 275K house with near 0 downpayment you need about 100K gross income. So you need to either grow your own income or get your girlfriend involved into something more profitable. This will keep you in the comfort zone. Of course, you can buy a 275K house with lower income but then you will have to save on other things. It is all about priorities in life.

Halifax real estate is really expensive. I mean Halifax is a nice city. But honestly houses are almost twice cheaper anywhere else in the Maritimes.


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## james4beach (Nov 15, 2012)

Woody said:


> the longer I rent the more it feels like I'm throwing money into a fire that could be used to build up equity/something of value for myself.


Don't get fooled by all the talk of "building equity" by owning a home. There is nothing special about owning a home and it's not some kind of magical route to saving wealth. It's just that for many people who lack financial discipline, the process of being forced to repay your mortgage translates to accumulating of savings. But that's only because those same people would fail to put aside and save the cashflow if they rented an apartment, even if it's the SAME amount of cashflow.

When home prices are rising, the homeowners see the advantage of rising prices.
Conversely, when home pricess fall, homeowners lose money -- there won't be any 'building up equity'

Homeownership can just as easily result in destruction of equity and destruction of wealth. Not only that, but compared to an apartment, it also means a lot of hassle -- you have to fix up your property, maintain it, pay property taxes, watch property taxes go UP year after year, pay insurance, pay big money for surprise repairs (roofs, boilers and other disasters which are in fact very common).

My advice, when comparing renting versus the home, is to try and estimate your total cost of both options over a period of time you think is realistic. In this comparison, assume you will sell the home for the same amount you buy it, which means the total costs are simply the below:

With the home side of the equation, remember to include: mortgage interest cost, agent commissions, property taxes, estimated cost of surprise repairs, insurance.

Then compare this total cost with renting.


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## james4beach (Nov 15, 2012)

Hawkdog said:


> What would the monthly mortgage payment be? versus what your paying in Rent?
> If you paying 1500 in rent and you can get a mortgage for 1000 I go with mortgage.


No way! Not even close. See my last post. But to illustate using your numbers, maybe over 5 years.

renting total cost = 1,500 x 12 x 5 = approx 90K total cost to rent

owning total cost = (1,000 x 12 + 2,500 prop tax) x 5 + 20,000 commissions + 2,000 emergency repairs
= approx 94.5K total cost to own

Looks to me that renting is still cheaper, even with 1500 rent vs 1000 mortgage.


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## Sampson (Apr 3, 2009)

james4beach said:


> It's just that for many people who lack financial discipline, the process of being forced to repay your mortgage translates to accumulating of savings. But that's only because those same people would fail to put aside and save the cashflow if they rented an apartment, even if it's the SAME amount of cashflow.


This is no trivial point as it probably describes most Canadians. While the OP seems to have managed to stay away from debt, he has little savings, and 0 proven ability to invest those savings.

I do agree it is too soon to get into a house, especially before some longer term decisions are made about settling in the city, about the girlfriend etc. Keep renting.


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## Spudd (Oct 11, 2011)

james4beach said:


> No way! Not even close. See my last post. But to illustate using your numbers, maybe over 5 years.
> 
> renting total cost = 1,500 x 12 x 5 = approx 90K total cost to rent
> 
> ...


Except that part of that 1000 mortgage is going to equity. You should really only count the interest if you want a fair comparison.


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## james4beach (Nov 15, 2012)

Spudd said:


> Except that part of that 1000 mortgage is going to equity. You should really only count the interest if you want a fair comparison.


You're right - good catch. For a proper comparison of this type, only the interest expense part of the mortgage should go there.


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## Hawkdog (Oct 26, 2012)

Fair enough, but consider these points:

-you only pay commissions when you sell the house, and now its possible for people to use MSL without a realtor - $500 bucks 
- also there are realtors who will negotiate their commissions - so even if you cut it in half thats - 84,000 - win right there.
-i wouldn't rule out repairs if your renting, especially if you have kids or pets - but it would be less for sure
- instead of the 500 extra per month in rent - put 500/month in your rrsp = 30,000 - use your tax return for some or all property taxes.
- the original poster suggested he would rent a room - so say $400/monthx5 = 24,000

so you pay 94,000 - but come away with 30,000 in RRSPs plus any equity you have gained. 
Plus the rent which should cover upkeep and maintenance as well a good portion of your utilities/taxes.

If you are renting you need to save on top of the 1500/month, so that's $2000 per month if you want to save 500 per month. But you add the tax return back in savings.

thats sorta how i look at, but convince me otherwise - i am really thinking about the renting thing these days - these discussions have me thinking.


The flaw in my logic is he is renting for 1000 currently, so that's why i asked about how much the mortgage would be.





james4beach said:


> No way! Not even close. See my last post. But to illustate using your numbers, maybe over 5 years.
> 
> renting total cost = 1,500 x 12 x 5 = approx 90K total cost to rent
> 
> ...


QUOTE=james4beach;183031]Don't get fooled by all the talk of "building equity" by owning a home. There is nothing special about owning a home and it's not some kind of magical route to saving wealth. It's just that for many people who lack financial discipline, the process of being forced to repay your mortgage translates to accumulating of savings. But that's only because those same people would fail to put aside and save the cashflow if they rented an apartment, even if it's the SAME amount of cashflow.

When home prices are rising, the homeowners see the advantage of rising prices.
Conversely, when home pricess fall, homeowners lose money -- there won't be any 'building up equity'

Homeownership can just as easily result in destruction of equity and destruction of wealth. Not only that, but compared to an apartment, it also means a lot of hassle -- you have to fix up your property, maintain it, pay property taxes, watch property taxes go UP year after year, pay insurance, pay big money for surprise repairs (roofs, boilers and other disasters which are in fact very common).

My advice, when comparing renting versus the home, is to try and estimate your total cost of both options over a period of time you think is realistic. In this comparison, assume you will sell the home for the same amount you buy it, which means the total costs are simply the below:

With the home side of the equation, remember to include: mortgage interest cost, agent commissions, property taxes, estimated cost of surprise repairs, insurance.

Then compare this total cost with renting.[/QUOTE]


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## Cal (Jun 17, 2009)

I have a buddy that ran some of his numbers by me the other day. He is renting in Toronto, has never bought. Is in a $330,000 condo. He actually has $330,000 saved. More set aside for an eventual home purchase actually.

He rents for $1300 a month and pays his own utilities. He did not calculate renters insurance, which is fairly cheap anyways. He calculated that $330,000 invested at 6.8% (historical average 6.8% for the 20 year period ending Dec. 31, 2012) would increase to $1,709,209 in 25 years. But he would have the monthly rent of $1300.

To buy the same place he is renting, w 0 down, would run about $1600 a month at 3.2% for 25 years. I know, 3.2% is a historical low and the 25 year average rate he will pay will be higher, but for arguments sake, he kept it constant. On top of the $1600 a month there would be a $350 condo maintenance fee. Plus insurance fees. $2000 a month to carry for even numbers. He did not take into consideration the potential increase in RE values over the 25 year period. But I used CC"s post http://www.canadiancapitalist.com/real-estate-returns-2/ to guesstimate that the RE could increase to a value of $1,556,161 with a 6.4% return over 25 years(I know that seems high, but I chose the best case scenario from the post).

To buy it outright, it would cost the $350 maint fees, plus ins....so $400 a month, plus the lost increase of the $330,000 invested, which was calculated at 6.8% return for 1 year ($22,440 / 12) $1870 a month. So $2270 a month to buy it. With the same $1,556,161 potential valuation.

Inflation was not taken into account for any calculations.

He is using the rent price vs the actual carrying expenses as his comparison as to when to buy. In his particular case it seems that renting has the least out of pocket expense monthly with the greatest potential return.

Having said all of that, he does intend to eventually buy a home.


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## none (Jan 15, 2013)

I think it's only fair with the comparison to use the low mortgage rate if you are going to use such a high stock market return rate.

I think CC post is completely wrong about price appreciation - most studies have shown that prices generally increase approximately with inflation. Further, Condo prices are well above where they should be so I wouldn't be surprised of real return on the condo would be closer to 0% after 25 years.

This math isn't at all surprising. Anyone who has sat down and actually done the math can tell you that in the current Canadian market, in major urban centers, renting is by far the clear winner (particularly if you go with the 0% real return after 25 years).


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## Hawkdog (Oct 26, 2012)

and there is an example of my flawed logic,

if your rent is cheaper than your mortgage its not really even a discussion.

I will note that if you bought a detached house 25 years ago in Vancouver for 330,000 it would be worth over a million now.


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## Hawkdog (Oct 26, 2012)

you also have to consider the average person out there is fully capable of a 0% real return on their investments after 25 years as well, if they have saved anything at all.



none said:


> I think it's only fair with the comparison to use the low mortgage rate if you are going to use such a high stock market return rate.
> 
> I think CC post is completely wrong about price appreciation - most studies have shown that prices generally increase approximately with inflation. Further, Condo prices are well above where they should be so I wouldn't be surprised of real return on the condo would be closer to 0% after 25 years.
> 
> This math isn't at all surprising. Anyone who has sat down and actually done the math can tell you that in the current Canadian market, in major urban centers, renting is by far the clear winner (particularly if you go with the 0% real return after 25 years).


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## none (Jan 15, 2013)

Hawkdog said:


> and there is an example of my flawed logic,
> 
> if your rent is cheaper than your mortgage its not really even a discussion.
> 
> I will note that if you bought a detached house 25 years ago in Vancouver for 330,000 it would be worth over a million now.


Of course, if we could all go back in time we would have all bought as many zero money down condos in Vancouver in 2003 and made an absolute killing. I certainly wouldn't suggest anyone do that now.

"past performance is not indicative of future returns'. Fundamentals are fundaments and belief can only support a bubble for so long.

Good krugman article predating the US bubble by a few years: http://www.nytimes.com/2005/08/08/opinion/08krugman.html?_r=0


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## CanadianCapitalist (Mar 31, 2009)

Cal said:


> I have a buddy that ran some of his numbers by me the other day. He is renting in Toronto, has never bought. Is in a $330,000 condo. He actually has $330,000 saved. More set aside for an eventual home purchase actually.
> 
> To buy it outright, it would cost the $350 maint fees, plus ins....so $400 a month, plus the lost increase of the $330,000 invested, which was calculated at 6.8% return for 1 year ($22,440 / 12) $1870 a month. So $2270 a month to buy it. With the same $1,556,161 potential valuation.


Since, homeowner is able to pay cash for the condo, I'm not sure if renting is clearly the better option. Earning 3.3 percent ($900*12/$330,000) ($1,300 in rent minus ownership costs of $400 per month) inflation-adjusted (assuming rents go up with inflation) and after-tax doesn't sound bad at all. Of course, if the condo unit price goes down in the future, the total returns from owning will go down.

That's the trouble with own versus rent calculations. The answer one gets depends on assumptions.


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## none (Jan 15, 2013)

Hawkdog said:


> you also have to consider the average person out there is fully capable of a 0% real return on their investments after 25 years as well, if they have saved anything at all.


If you have a well diversified low MER portfolio this is highly unlikely. If this did happen, your mortgage and investments would likely be your least concerns.


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## Concep (May 16, 2013)

*Market is to buyers*

Hello, 

Am from Montreal and putting on the market one condo  May 2013, the market is to the buyers, that's what my immovable agent told me. Bad for me but good for you. What it means to you is that you can deal the price of your immovable.

My two-cent experience: can get a mortgage rate as low as 2.8% (ING gives 3%), sign up for a maximum time (you're young the financial institution will go for it), but you pay your installments twice a month (instead of once, you will save), plus when you sign with your financial institution you make sure they do not charge any penalty or impose any limitation so if you want to put more cash on your mortgage (once a year for instance) you can. 

Also you still can access HBP if it is your first house (see link http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/menu-eng.html), which is a very cool program. 

Since am very independent person, I will say buy it alone  
Then, if you want to buy a "chalet" (cottage / country house) or another immovable, your life partner could access HBP... And you will be two happy owners.

Lastly, ask your municipality if they have special programs for new owners, you may find yourself exempted to pay taxes for 1 or 2 years. 

Back in 1997, in Old Montreal, I was exempted 2 years of municipal and school taxes. Pretty cool. But you need to ask (they won't tell you!). I just finished returning my HBP this year (a 15-year loan without interest). Personally, I deal with Scotia Bank (my rates always were ridiculously low), but you should "shop" your financial institution like you would for anything else.

Good luck! 
Concep




Woody said:


> I know everyone's situation is different (Do you really want/need a home?) and I'm usually the first to advise people selling their lives basically for massive mortgages however I just wanted the advice of some seasoned homeowners (or maybe seasoned renters who oppose home-owning? ).
> 
> I just turned 24 and got the rather exciting news that my career will be keeping me here (In Halifax) for at least the next 4 years.
> 
> ...


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## andrewf (Mar 1, 2010)

^Concep, HBP is only usable for primary residences. You can't use it to buy a vacation property.


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## m3s (Apr 3, 2010)

Woody said:


> I just turned 24 and got the rather exciting news that my career will be keeping me here (In Halifax) for at least the next 4 years.
> 
> Situation:
> Not married, 24 years old.
> ...


Congrats! I know the excitement you're probably feeling. I bought a house when I was 24.. exact same situation actually just swap RCN and Halifax for another base. Comp sci and practically common law as well :smile:

Now unless things have changed (which they do) Brookfield does not exactly just pay the full "$5000" CMHC fee for you, but rather use _your_ left over allowance to pay it. If you rent, you would cash out a pleasant amount for not costing the crown these RE transaction fees you are entitled. In my case I was able to make the 20% downpayment and instead cash out the personalized envelope (taxed unless thrown into RRSP) So it is basically your money in the end

For me that "at least 4 years" turned into 3 years twice in a row now (almost 2 years this time) This can also have serious financial implications. Many people are lured into their friendly bank salesmen for mortgages but beware. There is far far more to a mortgage than the lowest rate in town, especially when you may want to sell it anytime. In my case I was offered a move to Europe and would have paid ++$10k in fees to break the mortgage early if I hadn't done my research. Many others were not so lucky. I can pm you a broker who will protect you from this at little to no cost (the big banks do not)

The last landmine I see here is the rental to your friend. Be aware that if you rent out a portion of your home, you are _supposed_ to declare this and are no longer entitled to a significant chunk of money. You might break even after a few years but for all the hassle I'm not sure it's worth it (at least be aware of this). I'm sure many people rent out rooms and think nobody is the wiser and they can just say "I didn't know, the rules are confusing, I didn't read it blah blah" Please don't be like them and Mike Duffy :tongue-new:

Now when I sold after 3 years I made a handsome profit. It seems like a lot, but in reality it was about 5%/year back when the market was "hot hot hot".. (not including transaction fees and maintenance and renos and inflation and lost opportunity cost in my RRSP investments etc etc etc) It ended up as a nice profit thanks to being a heavily leveraged tax free investment. A leveraged investment can go both ways, and you may have heard the news of military families being crushed financially with no help from this exact unfortunate situation. Home equity assistance does not always apply.

For 3 years it's a wash financially imo (wild changes to the RE market aside) Most renters are only worse off imo because they just didn't have the discipline to invest the money they saved by renting. It's a lifestyle choice. Do you enjoy finding/buying/selling a house and maintaining a home (even while you are away at sea..) Or would you rather cash out the allowance and let someone else do the maintenance etc. It really depends on your lifestyle and mostly the situation with the girl really. I enjoyed the extra comfort and freedom of owning my own home, but I don't consider it easy money as others do. Hope you make it back to find my 2 cents haha


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## Hawkdog (Oct 26, 2012)

i bet you could ask a few people on the street and they would have no idea what a diversified low MER portfolio is.





none said:


> If you have a well diversified low MER portfolio this is highly unlikely. If this did happen, your mortgage and investments would likely be your least concerns.


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## none (Jan 15, 2013)

Hawkdog said:


> i bet you could ask a few people on the street and they would have no idea what a diversified low MER portfolio is.


Well sure but I don't see how that is relevant.

It's silly to say that 'owning is better because it's a forced savings plan and renters don't invest.' Who cares about the outliers - lets look critically at how the math works out and then if someone wants to screw it up by doing stupid crap then fine.

Should we compare someone investing in a diversified portfolio to someone who buys on a flood plain, a houseboat, in Detroit? Should we compare buying a house during the historically hottest real estate market Canada has ever seen to someone invested entirely in gold in the last year or to someone in high MER mutual funds?

We could but why not just work out the math the best way we can and then let people make their stupid decisions on how they will screw it all up rather than throwing the baby out with the bathwater.


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## Hawkdog (Oct 26, 2012)

That article predicted the crash 3 years in advance, is the bubble going to last 25 years? I don't really think we can predict what the housing market will be like in 25 years or the stock market.
I would recommend buying if the bubble bursts and the market crashes. Same as in the US.






none said:


> Of course, if we could all go back in time we would have all bought as many zero money down condos in Vancouver in 2003 and made an absolute killing. I certainly wouldn't suggest anyone do that now.
> 
> "past performance is not indicative of future returns'. Fundamentals are fundaments and belief can only support a bubble for so long.
> 
> Good krugman article predating the US bubble by a few years: http://www.nytimes.com/2005/08/08/opinion/08krugman.html?_r=0


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## Hawkdog (Oct 26, 2012)

so people who buy homes are outliers? I am just trying to get the point across that the average person doesn't do the math.



none said:


> Well sure but I don't see how that is relevant.
> 
> It's silly to say that 'owning is better because it's a forced savings plan and renters don't invest.' Who cares about the outliers - lets look critically at how the math works out and then if someone wants to screw it up by doing stupid crap then fine.


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## none (Jan 15, 2013)

Hawkdog said:


> That article predicted the crash 3 years in advance, is the bubble going to last 25 years? I don't really think we can predict what the housing market will be like in 25 years or the stock market.
> I would recommend buying if the bubble bursts and the market crashes. Same as in the US.


Absolutely. Once prices are again supported by fundamentals I would encourage someone with sufficient resources to buy as it can be a sound financial decision - right now.... with the evidence we have... not so much. That's all I'm saying.

Based on long term time series data houses generally follow roughly with inflation. At least in the US they have for the last 100 years. That's not a bad bet.


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## Hawkdog (Oct 26, 2012)

ya i am not disagreeing with the math or trying to say a bubble doesn't exist.

just for interest sake, condos are up over 20% this quarter in Palm Springs.


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## none (Jan 15, 2013)

Hawkdog said:


> ya i am not disagreeing with the math or trying to say a bubble doesn't exist.
> 
> just for interest sake, condos are up over 20% this quarter in Palm Springs.


My in-law did great with a Florida condo as well.

Maybe bubbles will be a lot more common in the future or maybe its simply a result of extremely long low interest rates (or extremely mobile capital). I'm not sure on that one.


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## Hawkdog (Oct 26, 2012)

Well i thinks its somewhat regional,
Take Saskatoon for example, it probably has something to do with interest rates, but its also the resource sector, there are jobs. People are moving there instead of leaving for Alberta.


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## Compounding1 (May 13, 2012)

OP I'm in a similar situation. I'm also 24 (turning 25 soon) and have been with gf for last 2 years. I'm looking to buy a house (on my own) but currently live at home rent free (just manual labour ) But alas everything good must end and time to move on finally. For me my mortgage payments would be about $750 a month + property tax, heat, insurance etc. Even still though where I live that basically breaks even with a decent place to rent. For example $900 rent a month where I live will land you in apartment buildings where the police are called all the time... If you're only paying 1000 (less than that since your gf pays some) and are comfortable with that than just stick to it and save save save. If anything you're in a good position to save for the next 4 years and maybe in your next location buy there if it's still something you want.


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## birdman (Feb 12, 2013)

In my opinion I think it would depend on your take on the real estate outlook. If you feel that house prices are stagnant I would suggest you save as much as you can and get a good down payment and even perhaps a reserve. If you feel house prices are rising quickly, get in now. Lots to think about financially including marital status, family in the future, job stability and future income. If you see your income rising sharply over the shorter term it could help support the buy side but if your are stretched after a purchase and your future wage looks somewhat stagnant, perhpas you should wait. Its not an easy call but as I say to lots of people, "it all depends on how you want to live your life" and its "all about choices". Good luck.


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