STOP Paying Your Landlord’s Mortgage!
April 13, 2009 by Danuta Levitzki
Filed under Buying Real Estate, First Time Buyer
Lets begin this article by stating: Renting is wasting money!
All those payments you’ve made at the end of each month, you will never see them back again. Ever.
But your landlord will, once he/she decides to sell the property.
If you remain a tenant, you are making your landlord rich, but you do nothing for yourself. But if you put those exact same dollars into a house payment instead of rent, you create “equity”…value that you own, that later can send your children to college, finance the start-up of your own business, or pay for your retirement.
For example:
If you are currently paying $1,000 a month for rented housing, then over the next three years, your landlord will effectively have reaped $36,000 of your hard earned cash! You’re paying his mortgage when you could be building equity in your own property.
What if I don’t have the money to buy a home right now?
There are many loan programs available that offer low and no down payment options. Some programs permit gift money as a down payment, and often sellers are willing to make a contribution to your purchase if they want to sell the home quickly. On top of that, the city of Montreal offers a Home Ownership Program that provides financial assistance to help first-time buyers.
Become your own landlord and build up future financial security. I’ll even show you easy strategies to speed up the pay-off of your home without making extra payment.
Call me to discuss your specific needs and we’ll find the program that’s right for you. We have a variety of low down payment and no down payment programs available.
Posted by: Danuta Levitzki, Conseillère en Financement Hypothécaire | Mortgage Loan Specialist
For current interest rates or to get more information on mortgage financing feel free to visit her website at Hypotheca.net or call direct at 1-800-605-6154. 
First time home buyers face many challenges in understanding the process of purchasing a home, obtaining a mortgage, and knowing which type of loan will best suit their needs. Advice from well meaning loved ones can be helpful, but buying a home is a major financial commitment and you would be wise to educate yourself on the home buying process before taking the first step.
Just wanted to put in my two cents in. I think not putting a down payment is a huge mistake, it's what most Americans have done and have created their current foreclosure meltdown because they didn't save their money and put little to no money down to own houses they clearly couldn't afford. A down payment lowers your monthly mortgage, who doesn't want to pay cheaper at the end of every month?
I think it's safer to put money aside for a good chunk of down payment before pursuing any hasty decisions to buy a home. Afterall, it's the biggest purchase you'll ever make in your life. Plus, that Home Ownership Program is only to help out temporarily, you'll have to pay back that money that they're lending you eventually right?
I say think before you leap!
A little more sophisticated analysis can be found in the New York Times Article here:
http://www.nytimes.com/2008/05/28/business/28leon...
Use the accompanying calculator to find when it really makes sense to buy…
I agree with Dahlia. Buying a house with little or no downpayment is very risky. The month comes fast and you have to consider not only the mortgage payment taxes insuranceor/and condo fees mainteance. Owing a house is a never ending money pit. And do not forget the painting ,furniture and decoration and on and on. It is better to wait and save as much cash as possible and make a wise decision instead of sleepless nights worrying about money and being house poor. You decide the market not the market that will decide for you
I had a feeling that this post will create a lot of responses. I'm glad to see you voicing your opinion!
Personally, I am not a fan of zero down payment either.
BUT I think that those who do decide to purchase with that option should keep the price at a minimum; like a condo for $180,000 or less, since the monthly payments will come up to about $850. It's hard to find affordable rentals these days, so it makes more sense to buy.
On the flip side, banks are not granting loans just to anyone, so for someone to even qualify for those loans, they have to be pretty solid (secure job, good credit rating, etc)
The ownership program doesn't ask you to pay back the money. The way I see it is that since you become an owner, you'll be paying the welcome tax (once) and property taxes each year. So that's how they get their money back. There no such a thing as free lunch :(
I completely disagree with this post. Renting seems to make a lot more sense financially. There is no way that the amount you pay in rent can translate into anything comparable in terms of a condo or house. For $1,000 a month, you can live in a good-size 3.5 in downtown Montreal, all included. What will that same $1,000 a month get you as an owner? Remember to included everything: mortgage + property tax + utilities + maintenance reserve + (possibly) condo fees. You won't be in downtown Montreal in a livable place, that's for sure. There's also the interest you forego by putting your money into a downpayment instead of keeping in a savings account or other investments. And of course your real estate appreciates in value, but unlike other types of investment (mutual funds, stocks, gold…) you can't cash it in when you're ready to retire… unless you sell and go back to renting, pocketing the profit.
Don't get me wrong, I rent right now and am dying to buy a place, but it's a lifestyle decision, not a financial one.
Anybody finds owning house, however, it seems not a intelligent plan for those who have less downpayment to purchase with much mortage from a Bank. Instead of paying to your Landlord, you will get to the similar situation paying to your Bank and other taxes and fees.
Lets agree that for people who have suitable downpayment, it is ok for them to plan a purchasing with moderate morgage. For others, it is better to rent until they save enough cash, thats the reasons why Banks and Landlords are exist.
Let's start over: Buying is not a decision for everyone.
Let's say, if you move frequently or plan to switch jobs, chances are you're better renting. Sometimes, as Adam said, you get a good deal renting close to your main interests: Office, friends, family,.. and you can buy a place with that money. Moreover, if you are finacially wise, then you know where to invest your pennies, so get interests, instead of paying them.
On the other hand, you always need a shelter, depite buying or renting. What if you put that money to build equity?
As an investment, you need to consider the opportunity you lose with your downpayment, and the gap between your morgage monthly pay against the rent.
I really liked this blog until I read this post. I am sorry but this article is just total BS. We all need to live somewhere and this is going to cost us money. If we rent or own it does not matter. The cost of ownership doubled during the last 8 years why rents not even kept up with inflation. From a pure financial point in most cases and cities it does not make any sense to buy anymore, renting is just so much cheaper.
To many amateur investors entered the market, with no clue about RE investing and no clue to properly evaluate RE properties (e.g. CAP rates) bid up properties to unsustainable prices which sooner or later going to deflate. I have been a RE investor for several years and exited the market because I just could not achieve any decent CAP rates anymore. So did several other RE investors I know. Only the fools are still investing.
RE is not an optimal investment now and won't be one for foreseeable future. If you just want to buy home for some personal reasons then go for it. But if you wanna buy to save vs. you pay for renting, then it is not gonna happen.
Also, always cut your own hair! It's a waste of money to pay someone else for a service! After the haircut grows out, what do you have to show for it? NOTHING.
The problem with the statement that renting is a waste of money is that it misunderstands the nature of the rental agreement. You're not paying for goods, you're paying for a SERVICE. You CAN fix your own car, but what if you don't know how? What if you have no desire to learn how? What if you just don't have the time?
A primary residence isn't an investment; it can't be unless you're planning to sell it. If you're planning to sell it, you have to contend with massive uncertainty going forward (look at the people that bought 2 years ago; think they feel good about their 'investment'? Will they be able to recoup their losses?), and you have to put money into the property to keep it viable for sale. When I owned a house, I spent at least $10k a year on average on upkeep, repairs and renovations. That doesn't factor in property taxes or the cost of my own time to do any maintenance.
Money that you save by not OWING someone at 3% (or 5%, or in 5 years, 8-12% — make sure you take into account the massive inflation that will almost certainly follow this stimulus spending) can be invested.
Buy property when you're ready to live in it or you want to MAKE money by being a landlord.
I don't see the reason why with all the interest rates being so low right now, and vendors dropping their prices, a person who has the means of owing a home will continue to pay rent, and keep renting for years to come. I met someone who has a very expensive car, but lives in a little 3 1/2 paying 1200 a month renting. What a waste of money! That monthly payment can be spent on your own flat. And when you sell it in a high market, you have the returns.Sure you have to pay taxes and all, don't we all…even when renting, the taxes are included in the rent, so you're still paying their mortgage and their taxes.
I agree that buying is not for everyone, but for those who can and won't (out of laziness or whatever) its a complete waste of money.
An important thing to note (which I mentioned already in my previous post) is that interest rates will almost certainly go waaaaaay up in the next few years. Why? Because we're going to have a massive inflation problem. Any time the government starts to print money, you end up with inflation. To combat inflation you…raise interest rates. In the 70s, interest rates were in the teens. You may be able to afford payments on your house right now at 3% interest, but will you be able to afford payments at 8%? 12%? 15%? You better hope for a big raise.
And this is what caused the 'bubble' in the first place. Those bad mortgages were actually just mortgages where you didn't have interest payments for the first few years. Because of the massive increase in house prices, the argument was that you could get the mortgage, pay a really low rate for a few years, then sell at a profit before you ever hit the really crippling payback phase. The problem is that a lot of people started taking out loans against their houses so they could buy nice stuff to go IN the house, and then when the repayment period came back up, everyone started to dump their houses at the same time. BAM, instant real estate glut, falling house prices, and bank crisis, because suddenly people can't pay back their loans at all (and they shouldn't have been given loans to begin with! They were ALWAYS a bad risk.) (The bank crisis also revolves around more complicated issues, like packaging up these bad loans and reselling them as something confusing to investment companies on the premise that these people would actually start paying up.)
Owning an expensive car is a different matter entirely; perhaps it's just a matter of priority. However, low interest rates don't make buying as cut and dry as you'd expect. People should really consider their options if for no other reason than the volatility in the market right now.
I stick to my original assertion: buy a place if you're going to LIVE in it. Don't think about selling it in 5 years, think about living in it for 20. Going 300k into debt is a huge decision and responsibility; treating it like it's the difference between coffee or tea in the morning doesn't do it justice. The original statement, "Renting is wasting money," is overly simplistic, all things considered. If you bought a house 2 years ago in Alberta or Vancouver or Toronto, you know that it's possible to make more money by sitting on it or investing it while renting than taking a gamble on the market.
May I throw this out there. As a new home buyer you need to realize all the costs involved with a place. Saying your landlord will make 36000 off of 3 months rent is so not true. If they have a mortgage for a 270000 townhouse, they have a lot to pay. Starts with 1200 month for the mortgage. Include the maintenance and condo fees, building insurance plus heat and water ( normal in our city) plus the mass taxes you pay ( 140 month) your looking at 1600 a month. How many people are willing to pay 1600 a month for a townhouse? or a condo? Condo fees are wards 300-600 a month where I live. All can say is, yes you build equity, but be every aware of all the "hidden" costs of home ownership. Also if you want to move, 10g to sell/ Don;t pretend its any less. No, you make money off of property either by sitting on it, or improving it, not just by owning a place.