Monday, August 19, 2013

Why Home Ownership is Better

Canada experienced an increasing demand in rentals and single family homes after World War II ended. The increased demand led to involvement from the Canadian government and led to the development of the Canadian Mortgage and Housing Corporation (CMHC). When you buy real estate inOttawa and other parts of Canada, you are allowed a mortgage loan of up to 80% of the property’s value. Investors who are increasing their real estate portfolio by adding rental properties are also guaranteed return.

The Canadian Bank Act prohibits most federally regulated lending institutions from providing mortgages without mortgage loan insurance for amounts that exceed 80% of the value of the home or purchases with less than 20% down payment.

Through your lender, if you are a first time homebuyer CMHC Mortgage Loan Insurance enables you to finance up to 95% of the purchase price of a home. The government program is mainly designed to help people with home ownership and has nothing to do with real estate investment.

Home ownership has its advantages. The two basic and most important advantages are that a home has the potential to be your most monetarily valued asset and the second is the emotional satisfaction that one gets after owning a house. Though many first time buyers may perceive the different rules of CMHC to be very strict for Ottawa, there are a few reasons why it is better to buy a home instead of renting one.

The mortgage payments may seem like a hassle but they should be considered as a savings plan. Instead of paying off someone else’s mortgage, (when you pay rent you are indirectly helping the landlord gain profits and make mortgage payments) as a home owner you make the monthly payments for yourself. Keeping up with your monthly payments you gain a two-fold advantage: the value of your home rises over the years and eventually the amount owed becomes smaller because most of the principal loan is paid. You can also get a second mortgage that can be used against built up equity as low interest loans.

As a homeowner you are more relaxed. You do not have to worry about the landlord increasing the rent or selling the house. You can maintain and repair the house and even renovate it the way you want. In a rental property you have to first talk to the landlord and wait for his/her approval.

However, if you have a job that keeps you on the move then it is better to rent a property instead of buying a house. You might not be able to look after the home or keep up with the maintenance and repair if you are not around often.

If you have questions about mortgage rules set by the CMHC and how they apply to you, contact your Ottawa real estate agent and ask them to help you figure out the answers while they help you figure out if owning a home is a good idea or not.
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