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How to give up renting without going broke

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No matter how many stories I read about housing price bubbles and rising interest rates, there's no way I would go back to renting, and most Canadians feel the same way.

For three long, miserable years, my husband and I rented a unit attached to our landlord's sprawling house in northeastern Toronto. Every time the landlord lit a cigarette, the stench filled our apartment. Every time we took a shower, someone would flush a toilet and scald us. The owner kept two cats but didn't allow us to have pets, so the mice that infested the place took refuge on our side of the house.

Perhaps the worst part was knowing that our monthly rent cheque was paying off our landlord's mortgage. As soon as we had a down payment saved up for our own house, we moved out and never looked back.

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For people like myself, no amount of facts, figures or common sense can sully the home ownership dream. A recent survey by Genworth Financial indicates that 92 per cent of Canadians, both homeowners and non-owners alike, would rather own than rent and feel there are benefits to homeownership that go beyond financial value, including a greater sense of well-being and security. Of the 1,500 people surveyed, 40 per cent own a home with a mortgage, 29 per cent have paid off their home, 26 per cent rent, and 6 per cent don't own their home but don't pay rent.

Despite the headlines warning of unsustainable real estate prices and decreasing affordability, the Genworth survey showed a significant increase in the number of Canadians planning to buy their first home this year (11 per cent) compared to last year (6 per cent). Ironically, those intending to buy a home seem to be well aware of the risks. Asked about the possibility of a housing price bubble in Canada, 47 per cent said they were somewhat concerned, and 14 per cent said they were very concerned. Seven in 10 said they believe housing prices will increase in the next 12 months.

Looking back at our first years as home owners, my husband and I probably fell into the category of "should have kept renting." Cash flow was non-existent, so major household repairs were put on hold, vacations were taken wherever we could stay for free, and my maternity leaves left us one paycheque away from broke. We were paying our bills, but extras were out of the question.

According to a recent RBC homeownership study, 46 per cent of younger homeowners say their mortgage is using up too much of their income. If you're thinking of buying your first house and don't want to end up strapped for cash, here are a few tips from Bernice Dunsby, a home equity specialist at RBC:

1. Leave some wiggle room: Do a spending analysis to see what the total costs of homeownership would be relative to your lifestyle and build that into your household budget. Make sure you have enough left over for furniture, repairs and costs of living.

2. Do a pre-approval and stress test: Get your financing in order before you start searching for a home. Work with a mortgage specialist to make sure you can handle potential interest rate increases and other expenses of home ownership.

3. Don't overbuy: Be realistic in choosing a home that's within your means and make concessions on what you're looking for. Set aside a budget for ongoing home maintenance and potential cost increases (for utilities, taxes and fees). Online tools and calculators can help you plan your budget.

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4. Look at payment flexibility: Look at a mortgage that allows you to accelerate or increase your mortgage payments. Doing so can save you tens of thousands in interest costs and take years off your amortization period.

5. Don't forget closing costs: Closing costs are typically 1 to 2 per cent of your final purchase price. Build this into your budget along with the cost of hooking up utilities and hiring movers.





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