Is it better to buy or rent a home? (Canada, Ontario, North York)

[Gaurav251]

Hi me and my mother are deciding to leave the rented apartment in the name of our abusive father and move on to some place where he cant bother us,

 

now so far the condos and housing prices are extremely high but it seems like there are a few places where things can be done, how ever I dont feel all to confident owning a home, especially since my mother says it will be in my name later on and become my property. This is because I might move back to India some time after I am done college here. Plus I dont know how great it is to own a house compared to just renting one for now.

 

For example we see condo rooms we can buy that will cost $400,000 and after the down payments and loans being repaid the maintenance fee will be $500 (while repaying the mortgage fees with the maintenance would be $2500 (at least that's what my mom says)). An example of such a place we think we should get is is this one - http://www.realtor.ca/propertyDetails.aspx?propertyId=13510627&PidKey=1160829994. My mother estimates it will take around 20-25 years to repay it from a single income of being a teacher (this also depends on my job I have later on to shorten that time). How ever if we move into one of these expensive condo rents or apartments with the cost of hydro, parking, renting fees together it will be around $1900 or $2000 (could also be around $1500 but those apartments are really old and squishy to be inside) monthly for a 2 bedroom condo/apartment.

 

Since I am in a state of slight fear and confusion on what to do (after all it isn't me getting loans and buying a house) I am here to ask you guys what you think I should do? I remember Stef saying sometime that the state could use my owned property against me and that's why I have some fears of having property owned in Canada rather then being more free to be able to move around. Thus I am here to ask your opinions on this matter.

[ThomasDoubts]

     With the disclaimer that I know very little about the Canadian real estate market, I can offer a few things to chew on from an economic perspective.

 

     You mentioned the possibility of moving back to India.  For the sake of argument, assume in 5 years you move back to India.  Had you chosen to rent a home, you will have paid your rent, and consumed the good.  No strings attached, and nothing tying you down.  Had you chosen to purchase a home by incurring a mortgage, I would assume you intend to sell the home, and use the proceeds to pay off the mortgage.  In this scenario, the price at which you can sell your home 5 years from today becomes important.  The price of your home may have appreciated 20% and you settle your mortgage with money left over to take to India.  Conversely, the price of your home may have depreciated 20%, and you sell the house at a loss, and make up the difference in savings to pay off the mortgage.  Being unable to make up the difference, you may have to delay the plans to move.  If you intend to move to India, while your mother stays in the home, will she be able to comfortably service the debt on her own?  Would she be willing to rent out a room to someone in the event that she cannot? 

 

 

     Supposing you don't move back to India, what would your intentions be?  Do you forsee living in the new home until it's paid off, and thereafter?  If so, how stable is the household income?  Would you/your mother be able to accumulate savings, or would the bills be paid with little to spare each month?  How does the home compare to similar substitutes in the area, in terms of price and amenities, location, size, condition, etc.  Would you be able to maintain the home without your mother if it is in your name? 

 

     Will you/your mother be able to make a sizable downpayment?  Here in the US, until you have 20% equity in your home you are required to pay a mortgage insurance premium every month which adds significantly to the cost of homeownership.  Does Canada have a similar law? 

 

    These are all, in my opinion, important questions to consider.  Renting vs. owning is fairly straightforward.  Renting gives you flexibility and less resposibility.  Owning gives you ownership if/when you pay off the mortgage.  Taking out a mortage without intending to pay it off, is taking a gamble that you can sell in the future and break even or better.  If I could give one piece of advice, worth the price of an internet forum post, it would be to not look for the best home you can afford.  Rather look for the best home where you can afford to be comfortable. 

[wdiaz03]

    .....

 

I agree with you 100%.

 

Owning a home also means fixing things that go wrong with it over time. If you are not a handy man expect to pay a lot more for repairs. To give you an example We had a clogged toilet (Don't ask...it was Mexican food week) Plummer asked for $120 for TRYING to unclog it. and another $80 or so to use a longer snake tool. I bought my own 25ft snake tool for $20 and did it myself...And this is one of many many things I had learned to fix over the years, washer machine, garage openner, fridge, faucets...AC units.

 

A friend of mine (renter) just has to pick up the phone and gets everything fixed at no extra cost.

 

From the OP post, It seems buying is not a good idea in my book. It makes sense to buy when you want to throw an ancher at a particular location because of schools or atmosphere for your kids to grow up in.

 

Peter Schiff has made good arguments on this topic.For example, It also makes sense to buy if you can lock a low interest rate with little or no money down. as he expects inflation to lower the cost of the loan over its life. e.i. The last payment 30 years from now of $2500 would be the cost of a mail stamp.

[Gaurav251]

Hmm all good points,

 

so me and my mom are now deciding to get something cheaper and still comfortable with around the same maintenance cost,

 

http://www.remax-premier.ca/listings/1262302-5-parkway-forest-dr-toronto-ontario-c2725528

 

http://www.remax-premier.ca/listings/1242534-20-forest-manor-rd-toronto-ontario-c2698372

 

Been to these two places, they are ok and with a little polish will do fine.

[LovePrevails]

I would say the price of housing is likely to drastically fall over the next years due to state debt, decreasing income etc.

 

when people can't afford the rent the landlords will have to bring it down which will mean the value of houses will come down

 

plus they may raise interest rates which will make it less easy to buy on credit which will lower the value

 

the value is artifically inflated due to years of government tampering with itnerest rates and printing money

 

sad to say we came out last, if we were around in the late 70s we could have bought lots of property and sold it in the that 90s but there you go,

they sold us off

[ribuck]

If your situation is uncertain, always rent. When your situation is settled, consider buying depending on the circumstances at the time.

[Existing Alternatives]

Rent!

On top of all things mentioned above, you really need to consider three things:

• Flexibility. If you don’t like the building, neighbourhood, the country, if you rent, you can always leave on a month notice, even before your lease is officially over. If you own, you are stuck – selling a place at a good (not fire sale) price is a very long process. Plus, if the neighbourhood turning bad, you may not even be able to sell at any price.
• Monthly cash outlay. Mortgage + maintenance + taxes vs. rent. There is also a matter of utilities, but they could be included either with maintenance or rent, so you really need to figure it out.
• Your knowledge of the market. You mentioned your timeline is possibly 5 years. Do you know what the place is going to be worth then? Will you be willing to take a loss when you decide to sell, can you afford to?

Also, be careful when forecasting your long term mortgage costs. Unlike our American brothers, Canadian mortgages are usually 5 years in term, meaning 5 years from now you are looking at most likely much higher interest rate and resulting higher payment.

 

Specifically to Toronto. By any analysis and account the market is super-over-heated. Everyone agrees: banks, government, city, developers, everyone except for real estate salespeople. What can possibly sustain this market when there are plenty of brand new units being dropped on the market every month?

 

Even more specifically, that building. There must be some reasons why it is so cheap: how old is the building? I would guess over 30 – it probably requires some serious capital repairs, which means huge increases in maintenance (btw, unlike rent, maintenance can go up by any amount each year). Also, Don Mills is not exactly the best neighbourhood to settle in.

For the amount you planning on paying in all the related expenses, I’m sure you can find a nicer, newer condo in a better neighbourhood to rent. Even better, see if you can rent a place in that building and see if you like living there.

[Gaurav251]

I would really like to rent a place but my mother feels 'very' strongly about buying a place as she thinks "the money is not wasted". Plus all the places here have huge rent costs with hydro and parking fees.

 

by the way these buildings are more then 40+ years old, so even I am scared about the maintenance costs and my fears are telling me this is not good but unfortunately its not my money and there is little I can do but heed advice to my mom. Me and my mom like the place don mills because we have been living here our entire lives hence it feels comfortable here and when I ask my mother what about all these other places she says its "bad neighborhoods" and thus I am restricted to this location really. My mother also says it will be of no hindrance to me in the future and that she will be able to pay back the loan/mortgage by her self and I can keep the property after wards. It wont really be a loss for me as I am not the one who bought and paid for the place and my family already owns property in India which I can settle into at any time I want. The reason my mother wants to buy property here in Canada is so she can have a 'easy' time switch from here to India again any time she wants (gives same reason for me too). I might settle down here if the economy and job market looks good but if not I will just simply fly back to my home country and find some work there. I kind of think its a good decision but I still have a few worries about it but these are worries that wont effect me until years ahead of my life. I feel a bit of powerlessness in this decision making but I just wanted to ask the question out of the good of my conscience really, and to see if I could say anything to my mom about changing her mind.

[wdiaz03]

I would really like to rent a place but my mother feels 'very' strongly about buying a place as she thinks "the money is not wasted". Plus all the places here have huge rent costs with hydro and parking fees.

 

...

You just have to convince your mother than buying will result in more money being wasted than renting. But maybe she wants to own a place...just make sure she understands as many props and cons and possible. Ask a professional do your homework.

 

If she has the money for the down payment, it might be a better idea to invest that money. get a return and use it to help with the rent etc.

[Existing Alternatives]

We have been seriously brainwashed into getting into enormous debts to support these pyramid scheme called real estate market. Unfortunately, you are indeed powerless trying to overcome all that. Any argument you can make, regardless how rational, will be perceived as that coming from a kid who is yet to learn the “ways of the world”. At the same time, you said it, this is not your money, so…

 

Just make sure your mom understands all costs and risks associated with ownership: likely to increase maintenance fees, taxes (also likely to increase), utilities (if not included), mortgage (likely to increase in 5 years), potential future problems with the neighbourhood, resale value (likely to decrease), transactional costs (lawyers both on buy and sell side, realtors, luckily only on sell side), plus, the general upkeep.

 

In case you feel like being perceived as completely uncooperative smartass (I, obviously, do), you can always get her to take another look at the first picture (http://www.remax-premier.ca/listings/1262302-5-parkway-forest-dr-toronto-ontario-c2725528): the façade is crumbling (not a priority for the management company) and there are two security cameras in plain view (I bet as a response to being such a safe neighbourhood).

At risk of beating the dead horse, I did a quick search on MLS and found this beauty http://www.realtor.ca/propertyDetails.aspx?propertyId=13480168&PidKey=-59303180 $1,500 a month. I'm sure you can find even better and cheaper properties in that area...