# Looking for opinions on house buying...



## The_Mechanic (Jan 6, 2012)

So my girlfriend and I are are looking to buy a house in the near future. Nothing too crazy (under 200K$). The problem is that in Quebec (maybe in other provinces too I dont know) , you have to have a minimum cash down of 20% to avoid the housing insurance (SCHL). But you can buy a house with as little as 5% cash down. Now we have 2 available scenarios:

1: buy a house in the next few months with only 5-8% cash down and pay more money in the long run for the mortgage insurance aswell as interest on a bigger part of the mortgage , or...

2: wait another 2-3 years and keep piling money aswell as keep paying rent in order to get together the minimum 20% cash down and avoid the mortgage insurance and pay less intersest since there is less money borowed. 

I'm trying to figure out if its worth renting for another 2-3 years in order to save some money or if i'm going to spend the money in rent anyways....Rent is currently only costing us 500$ a month because I have a great arrangement with the landlord (My father) in which I take care of the whole building in exchange for low rent.

I'd love to hear some opinions of poeple in this scenario or who have any relevant advice to help me.

Thanks!


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## Plugging Along (Jan 3, 2011)

This is a no brainier. Keep renting. The amount you pay for rent is so low, you will pay that in interest, and the additional cmhc fees. It's not like the market is super to right now.


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## BRS9 (Feb 22, 2011)

Wait two years and buy the same house for 20% less.


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## slacker (Mar 8, 2010)

If you don't buy now, prices may drop in two years time !!


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## hystat (Jun 18, 2010)

ditto on renting. You are young and renting keeps options open for location changes. Buying is great if you know for sure you won't be moving for 5 to 10 years or more. But if you move in 3 years, you'll pay as much as 3 years rent in real estate fees, closing costs and land transfer tax.


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## BRS9 (Feb 22, 2011)

hystat said:


> ditto on renting. You are young and renting keeps options open for location changes. Buying is great if you know for sure you won't be moving for 5 to 10 years or more. But if you move in 3 years, you'll pay as much as 3 years rent in real estate fees, closing costs and land transfer tax.



That's a very valid point that I think a lot of young people don't realize.


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## hboy43 (May 10, 2009)

Hi:

I had two houses for a while, now one, many days I'd like it to be zero. $500/month, I'd ride that horse as long as I could stand it.

hboy43


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## Homerhomer (Oct 18, 2010)

BRS9 said:


> Wait two years and buy the same house for 20% less.


How do you know thi house will be 20% less in two years, maybe it will be 20% more?


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## peterk (May 16, 2010)

Also please keep in mind Mechanic that the SCHL insurance on <20% down isn't there to punish you. It's there to protect the bank, and to remind you (in a way) that if you have less than 20% buying a house carries SIGNIFICANT risk! It is risky because there's a good chance the market will go down. IF you have 20% in the house, there is still a good chance that the market will go down, but it will be very unlikely that you will go underwater on it (i.e. you owe more to the bank than the house is worth)

You have to think "why is the bank demanding that I purchase this insurance?" It's because they think it's too big of a risk to buy a house with <20% down. If they think that, maybe you should too.


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## the-royal-mail (Dec 11, 2009)

Buying a house with someone you call a "girlfriend" is also very risky. Not enough commitment to get married but enough commitment to sign to a HOUSE purchase? Yikes.


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## m3s (Apr 3, 2010)

Save up for the 20%. HBP can help you get their faster, especially en Québec (higher income tax = higher tax return) For the gf comments I agree not to rush into buying a house too soon but also understand many people can be in a serious relationship nowadays without the traditional "marriage"


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## CanadianCapitalist (Mar 31, 2009)

The_Mechanic said:


> 1: buy a house in the next few months with only 5-8% cash down and pay more money in the long run for the mortgage insurance aswell as interest on a bigger part of the mortgage , or...
> 
> 2: wait another 2-3 years and keep piling money aswell as keep paying rent in order to get together the minimum 20% cash down and avoid the mortgage insurance and pay less intersest since there is less money borowed.


It is impossible to answer which option will be better ahead of time. Say you go with (1). You might find out that housing markets soften after you buy and you end up wishing you had waited because you would have a higher down payment saved up and you could have purchased a home at a lower price. Or you might find out that prices go up even more and you are relieved at jumping into the housing market right away.

I agree with the general sentiment that housing prices are looking stretched right now. But that's no guarantee that a fall in prices is imminent. Who knows what will happen? Housing may crash, it may plod along or it may go up even more and then crash.


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## The_Mechanic (Jan 6, 2012)

Thanks for all the great comments, I guess the logical option is to stay in the rented property for a while still. I know its cheap, but when it doesnt belong to you, you never really feel at home. I want a place to call my own! But for now it seems the clear choice according to most is to wait for another year or two and buy something with a bigger down payment and lower the monthly mortgage.



the-royal-mail said:


> Buying a house with someone you call a "girlfriend" is also very risky. Not enough commitment to get married but enough commitment to sign to a HOUSE purchase? Yikes.


This is actually really not relevant to me. We Quebecers arent big on marriage. My parents arent married and neither are my girlfriend's parents. I dont plan to ever get married , or at least not in a short term horizon. Maybe in our 30's, but not before (We're 26). And even then, we'll see when we get there.

To me marriage is of no importance and it doesnt make us more a couple, nor does being not married make us less a couple.


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## The_Mechanic (Jan 6, 2012)

mode3sour said:


> Save up for the 20%. HBP can help you get their faster, especially en Québec (higher income tax = higher tax return) For the gf comments I agree not to rush into buying a house too soon but also understand many people can be in a serious relationship nowadays without the traditional "marriage"



Excuse my noob-ness, but what is HBP ?

EDIT: Oops never mind! Just realized that's just the english term for RAP (Régime d'accesibilité à une propriété). I'm still a little rusty on english terms! 
And yes I'm building my RRSP to the maximum of what I can afford for this exact reason. I think HBP is freaking brilliant


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## Causalien (Apr 4, 2009)

If the two of you can't generate the $40k within a year (no previous savings?) then I wouldn't recommend buying a house worth $200k. Taxes in Quebec will only go up from here. So...


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## the-royal-mail (Dec 11, 2009)

HBP is not brilliant. It is nothing more than a program that encourages people to raid their valuable retirement savings for the purpose of pumping RE, an industry not in need of any encouragement. Ask yourself if you can't afford the full cost of a proper DP today, what makes you think you'll be able to afford to pay back the HBP loan in the future once you've been living in a higher cost house? Further, this will cost the taxpayer more money in the future when there is a new generation of poor retirees. This is not a good idea IMO. If you want a house, save the DP in cash.

Also, to the OP, do you have any emergency savings tiers established? These are even more important if you're going to increase your liabilities and monthly expenses.


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## Four Pillars (Apr 5, 2009)

The HBP is a brilliant program - especially if you are in a higher tax bracket and/or are a good saver.

My only complaint is that the maximum borrowing amount allowed is standard across Canada. I wish they had some sort of adjustment factor so that people in more expensive areas could borrow more than someone in tiny town.


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## blin10 (Jun 27, 2011)

BRS9 said:


> Wait two years and buy the same house for 20% less.


talk is cheap, bet you didn't go all in on your forecast


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## Sherlock (Apr 18, 2010)

The_Mechanic said:


> This is actually really not relevant to me. We Quebecers arent big on marriage. My parents arent married and neither are my girlfriend's parents. I dont plan to ever get married , or at least not in a short term horizon. Maybe in our 30's, but not before (We're 26). And even then, we'll see when we get there.
> 
> To me marriage is of no importance and it doesnt make us more a couple, nor does being not married make us less a couple.


But have you considered what happens if you break up?

When a married couple owns a house and divorces, there are clearly defined laws that determine how the property is split fairly. For example, if you divorce your wife, the courts can determine who gets the house, and the other one has to give up their claim to the house, usually in exchange for money. If you are not married and break up, there is no law that can force your girlfriend to give up her half of the house, she can choose to hold on to it and refuse to make her half of the mortgage and other bill payments while at the same time refusing to buy you out of your half, screwing you over and ruining your credit.

I highly recommend against buying a house together with someone unless you are married to them.


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## Sherlock (Apr 18, 2010)

Four Pillars said:


> The HBP is a brilliant program - especially if you are in a higher tax bracket and/or are a good saver.


It allows you to use the government's money to add to your downpayment. To use an example provided by Garth Turner: Suppose you and your spouse have a combined $50,000 for a down payment. If you each put 25k in your RRSPs then withdrawn them under the HBP, you get a combined tax refund (if you're in the 40% tax bracket) of 20k. So now instead of a 50k downpayment you have a 70k one.


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## donaldmc (Feb 27, 2012)

It's really quite hard, well i think there's other way to that.I think the first option is not that bad, i'll rather go for it.


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## The_Mechanic (Jan 6, 2012)

Causalien said:


> If the two of you can't generate the $40k within a year (no previous savings?) then I wouldn't recommend buying a house worth $200k. Taxes in Quebec will only go up from here. So...


Are you serious? 40k within a year? Thats 40k after tax, which means roughly 65k of pre-tax money. I make 56k and my girlfriend makes 38K. that means you think its possible for us to save more than 60% of our combined pre-tax income??? LOL. I wish life were like that, but I doubt any couple making less than 120k combined can save 40k within a year. 

That plus the fact that by your standards, If we could save 40k within a year, we could pay off our whole 200k house within 5 years.....
I don't plan on getting a 25 year mortgage, but not a 5 year mortgage either! lol



the-royal-mail said:


> HBP is not brilliant. It is nothing more than a program that encourages people to raid their valuable retirement savings for the purpose of pumping RE, an industry not in need of any encouragement. Ask yourself if you can't afford the full cost of a proper DP today, what makes you think you'll be able to afford to pay back the HBP loan in the future once you've been living in a higher cost house? Further, this will cost the taxpayer more money in the future when there is a new generation of poor retirees. This is not a good idea IMO. If you want a house, save the DP in cash.
> 
> Also, to the OP, do you have any emergency savings tiers established? These are even more important if you're going to increase your liabilities and monthly expenses.


That really depends on how you see it. I would not be putting thousands and thousands of dollars a year in my rrsp if i were trying to save the maximum possible amount of cash for a down payment. I'm only using the RRSP to get the tax exemption on my money to help build my down payment as quickly as possible. Therefor in my case it is in fact, brilliant.

I have pumped my HBP RRSP to nearly 25k within the past 3 years. I'm 100% certain that I can easily refund this within the allowed 15 year period (5x longer than it took me to pile up the sum). 

I have also calculated how much mortgage payments, taxes, and expenses would be and I have no problem making the payments. Sure I wont be eating out as much and spending on useless stuff, but I'm sure I'll be fine.


---And as for all the comments about ''what if you and your girlfriend break up?'' ....I'm not here for a lesson in relationships. I dont go through life thinking ''what if''.... We are solid and will be for a long time. And if we do split up in the future, Neither of us is the type of person who will try to rip the other one off...We are both adults and will deal with whatever happens when and if it ever does...


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## Sherlock (Apr 18, 2010)

No one's giving you relationship advice, I was trying to explain to you the legal ramifications of buying a house with someone you're not married to. If you're so sure that you're not gonna break up then go ahead and buy the house together.


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## Four Pillars (Apr 5, 2009)

Sherlock said:


> It allows you to use the government's money to add to your downpayment. To use an example provided by Garth Turner: Suppose you and your spouse have a combined $50,000 for a down payment. If you each put 25k in your RRSPs then withdrawn them under the HBP, you get a combined tax refund (if you're in the 40% tax bracket) of 20k. So now instead of a 50k downpayment you have a 70k one.


I'm not following. If you withdraw $50,000 from your RRSP using HBP, don't you have $50,000?


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## houska (Feb 6, 2010)

In your situation, the financial argument is strongly in favour of sticking it out with the rental for a few more years.

If you buy for $200k, paying $16k down (assuming 8%), you'll be mortgaging $184k+ another 5k in CMHC insurance fees. At a 5 year rate of 3.25% you'll be paying about $825/month mortgage payment. Plus you have to count on roughly 2% per year of the value of the property for taxes and maintenance (approx) so you need $1100-1200 per month for your living expenses, compared to your current $500.

Now a bit of the mortgage payment is going towards principal, but basically you're paying 2x+ for housing. If you took the extra $700/mo and instead saved it towards a downpayment, in 3 years from now you'll have saved an extra $25k, which will give you a lot more flex to buy a house then with no or lower CMHC fees and less overextension risk. 

That's the financial argument. You have to judge the emotional one - owning a place, being able to change it as you wish, is for many people an important element of becoming settled. And the $25k downpayment save-up financial argument doesn't mean a thing if you and your girlfriend will spend more on entertainment since you want to get out of the "dump" you will feel you are living in.


To others: Québec's marriage rate is about half of Canada's average and already in 2001 the percentage of families that were common law was double the Canadian average. And it's more so that way in the young. It's just the way it is...it doesn't mean there is any less commitment.


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## the-royal-mail (Dec 11, 2009)

I just sense the OP is in some sort of a rush to buy a house and has already made the decision to do so, despite what we're all saying. That's a shame really, as there's lots of solid advice in this thread.


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## The_Mechanic (Jan 6, 2012)

the-royal-mail said:


> I just sense the OP is in some sort of a rush to buy a house and has already made the decision to do so, despite what we're all saying. That's a shame really, as there's lots of solid advice in this thread.


Well you are sort of correct there. I'm in a rush to buy a house because i'm in a rush to get into my own place and start building a life for myself and my girlfriend. 

I am however not set on a decision yet. In fact I am probably leaning towards waiting for another 2 years because of most of the info in this thread. As much as I really want to own a house as soon as possible, I'm capable of seeing the benefits to staying in a 500$ a month appartement for another couple years.


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## Causalien (Apr 4, 2009)

TheMechanic:

Just because you can't, doesn't mean others cannot. 40k for 200k house, 20k for 100k house. It's a simple measure I find useful to gauge what kind of house I can buy. It does not mean that I am saying you need to pay it back that fast. It is a measure of your ability to save and pay it down in bad times. I did not know how much you earn nor thought about how absurd it will be with your income because I did not care and I did not know.

And this is the best kind of advice. People who don't care about your situation, because it is purely objective. Now I am starting to get the same feeling The-Royal-Mail have and you've made up your mind already. So we should move on to the next phase. 

How to structure the house buying.
I suggest to have the house to one person's name only, while the other person pays rent. Or one can draft a lawyer promissory note to another for half the house's value (Cost $500 I think). I agree that joint ownership of a house in your situation is tricky. It is legal cluster **** and the two of you might not have the same timing on when to sell the house. So when the market dives, instead of having one of you panic and force sell the house, the person who doesn't own the house will not apply pressure on the other because it is not their problem. They are responsible for the loan and the loan only. It lessens the strain.


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## peterk (May 16, 2010)

Why is "get into my own place" synonymous with "start building a life for myself" ? Unless your life is building houses ...

I understand that you are living in your dad's building. Perhaps this is making you feel restrained in the starting-your-own-life department. But realize that it is probably entirely to do with the family/control issues of the situation, and nothing to do with the simple fact that you are renting. Move out and rent another place on your own, see if that makes things better.

Renting vs. Buying I feel becomes such a heated debate because most of us have been mentally conditioned (myself included) by our families for the first 20 years of our lives that buying a house is the smart, grown-up thing to do. In fact most of us probably had no concept of what an investment was in our childhood other than hearing "the house is an investment" 

Telling people that buying a house is bad is really like trying to teach the general population that brushing your teeth is bad for you. No one is going to believe you, because it's ludicrous, it's what you've learned and known your whole life.

If it weren't for all that. The rent/buy argument would be short. Compare the price to buy vs the price to rent in your city. If the ratio goes higher than your threshold then don't buy, if it drops under do buy. End of story.

*** The second half of this post is not directed at you Mechanic. I'm not saying you are this hypothetical person.


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## twowheeled (Jan 15, 2011)

Four Pillars said:


> I'm not following. If you withdraw $50,000 from your RRSP using HBP, don't you have $50,000?


Plus your tax return.


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## Charlie (May 20, 2011)

Good luck with the house Mechanic.

Buying a house is often more a lifestyle then financial move. You're not going to perfectly time the market. Most people don't put 20% down on their first home.

Just understand the costs. And the 'rent' you pay through buying. This includes interest, prop tax, opportunity cost on your down pay, added insurance, utilities, and maintenance. And the mortgage insurance fee if you buy now. These costs will be more then you think and they are just as much 'money down the drain' as rent. In your case they will be a fair bit more then $500/mo. So your 'best' financial move is likely to be continuing to rent...the likelihood of a big spike up in price seems unlikely in the short term. But that doesn't mean it's what you want to do, or what's best for you. 

Also consider the transaction costs of buying and selling are substantial, so make sure it's a place you want long term.


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## Four Pillars (Apr 5, 2009)

twowheeled said:


> Plus your tax return.


Gotcha.

This assumes that each person is still in a high tax bracket even after making a $25k contribution.


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## brad (May 22, 2009)

Sherlock said:


> If you are not married and break up, there is no law that can force your girlfriend to give up her half of the house, she can choose to hold on to it and refuse to make her half of the mortgage and other bill payments while at the same time refusing to buy you out of your half, screwing you over and ruining your credit.


This is true, even in Québec where the common-law marriage (l'union de fait) seem to carry a bit more weight than it does in other provinces. Details (in French) are at http://www.justice.gouv.qc.ca/francais/publications/generale/union.htm, but basically what they advise is that you draw up a legal agreement when it comes to buying a house. My girlfriend (really my common-law wife) and I simply drew up a will with the same notary who handled our mortgage, and that lays out everything legally so it's clear how everything would be divided if one of us dies or if we split up.

In Québec the legal paperwork for a mortgage is handled by a notary, and notaries are authorized to prepare wills. It's convenient to do them both at the same time using the same notary.


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## The_Mechanic (Jan 6, 2012)

peterk said:


> Why is "get into my own place" synonymous with "start building a life for myself" ? Unless your life is building houses ...
> 
> I understand that you are living in your dad's building. Perhaps this is making you feel restrained in the starting-your-own-life department. But realize that it is probably entirely to do with the family/control issues of the situation, and nothing to do with the simple fact that you are renting. Move out and rent another place on your own, see if that makes things better..


I understand where you are coming from here, but for me , renting is just not a viable option. I want my neighors far away, not one wall away. I want my own backyard, my own garage, my own everything. I want to be able to rip out the kitchen and build a new one if i dont like it or buy a jacuzzi and stick it out back if i feel like it. 

I also dont want to raise children in a rented appartment. I know that sounds stubborn, but to me, raising a family is done in a house, where the kids can run around in the yard, and make noise without worrying about the neighbors, and have a dog, and etc. etc...


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## RoR (Jan 18, 2012)

I thought that if you lived with someone for more than a year, or if you lived with someone you have biological children with for more than a few weeks, that thefamily home could not be written out. Is that clear? 

Eg, if I live with someone for 1 year plus 1 day, and we break up, and we have an agreement that one of us has to walk away from the house, that by law the house has to be spilt, even if written into a separation agreement. Marital home is excluded. 

And if we had biological children together, the time period is really really short that you have to live together for, for the house to have to be split 50/50. 

Am I wrong?


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## MoneyGal (Apr 24, 2009)

Yes.


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## RoR (Jan 18, 2012)

Oh dear. No one tell my spouse. I told him moving in was fine but that we had a day short of a year to figure out if we were getting married or not or he had to move out. lmao Cause the house was mine!

_Eta: For Ontario family law purposes, you must cohabit 3 years, or have a child and a relationship of some permanence.

2. Possession of the matrimonial home. Upon a marriage ending, there is an automatic right to stay in the matrimonial home, even if it is not in your name. You have no such right in a common law relationship in Ontario - if your name is not on the home, you could simply come home one day and find yourself locked out._


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## Jon_Snow (May 20, 2009)

Nice to have the option to buy a 200k house. My wife and would love to move out of our condo get a house, yard, hot tub etc. Right now we could probably come up with down payment of 400k. That would still mean a mortgage of about 300k to get an decent home where we live. 

I can appreciate Mechanic's strong desire for a home... and envy the fact that there doesn't appear to be a real estate bubble in his part of Quebec.


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## kcowan (Jul 1, 2010)

The_Mechanic said:


> I understand where you are coming from here, but for me , renting is just not a viable option. I want my neighors far away, not one wall away. I want my own backyard, my own garage, my own everything. I want to be able to rip out the kitchen and build a new one if i dont like it or buy a jacuzzi and stick it out back if i feel like it. ...


You are confusing living in a home with purchase. You can rent a nice home with a new kitchen and a jacuzzi. Or you can buy an apartment. Keep your comparisons apples to apples. You owe it to yourself and your finances.

(To buy a house without considering what you can rent is foolhardy.)


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## the-royal-mail (Dec 11, 2009)

Relating to the OP's last post above, those are all excellent points and reasons for buying a house and a nice property. I get that. So, from the description am I right in assuming you want to live in the country someplace?


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## The_Mechanic (Jan 6, 2012)

kcowan said:


> You are confusing living in a home with purchase. You can rent a nice home with a new kitchen and a jacuzzi. Or you can buy an apartment. Keep your comparisons apples to apples. You owe it to yourself and your finances.
> 
> (To buy a house without considering what you can rent is foolhardy.)


I am comparing apples to apples. There are no (or very very few) houses for rent in my city. Here if you rent, you rent an appartment. Homes are sold, not rented. Also, renting a home here is stupid, because for about 10% more per month you can buy. The difference in pricing is really low and its not worth renting unless you only want the property for a couple years. 

I can see your point being valid for larger cities where buying will cost unworldly amounts of money versus renting, but thats not the way things are in my current city so I dont feel the need to weigh renting vs. buying...especially with the scarcity of homes for rent around here.



the-royal-mail said:


> Relating to the OP's last post above, those are all excellent points and reasons for buying a house and a nice property. I get that. So, from the description am I right in assuming you want to live in the country someplace?



Well that depends on what you mean by country. Cities around where I live are low density and just buying a home 10 minutes outside the city is practically living in the country. Big portions of land can be had for not too much money with a decent house, and thats what i'm looking for. Its hard to compare to city life in a place like Montreal or Toronto seeing as how the housing market is so different. To a Montreal city dweller, just going over the Champlain bridge is considered ''the country'' , which it's really not


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## DanFo (Apr 9, 2011)

I bought my place with only 5% down..though it'll be paid off after only 9 years,,,,I would have liked to have waited for a higher down payment to avoid cmhc fees but I had to move out of where i was and moving sucks. It worked out ok for me but housing wasn't so over priced at the time I bought either.


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