2 Steps to $20K
2 steps to $20,000
Real estate is always a fine balance towards what is owed on your home (mortgage) and what your home is worth (equity). Sometimes in a great market, when
prices rise very quickly, you can make thousands of dollars on the sale of your home for doing absolutely nothing. A right place at the right time scenario.
Other times when the market slows down and becomes stale, you either have to hold on to your property and make mortgage payments to bring the principle of your property down or hold on to your property long enough for the market to hit another upswing. Either way, you are relying solely on the market.
What if I told you that you can do 2 things to help keep your head above water in any real estate deal. Sure that would be fantastic…says everybody.
Step 1
The first step you should do when buying a home is to put at least 20% down for your down payment. Depending on your relationship with your bank ,you usually need a 20% down payment to waive the Canadian Mortgage and Housing Corporation mortgage insurance fee. CMHC insures a banks lending for anything under a 20% down payment and they pass that cost on to you. Isn’t that nice of them?
Lets use a simple example to get a clearer understanding. Lets say you buy a house for $350,000 and put down 5%. That would work out to a $17,500 down payment (math whiz I know).
On top of this down payment you would have to pay an extra $10,473.75 in CMHC fees and only be allowed to have a 25 year amortization.(CMHC regulation) This $10,473.75 amount gets added to your mortgage and raises your mortgage amount almost back to the original purchase price.
You then begin to pay interest on this amount until you sell your home or pay off your mortgage. So technically if you stayed in your home for the full 25 years, you would still be paying interest on part of that CMHC fee till the very end.
Step 2
The second way to save thousands of dollars is a very obvious one. Sell your home yourself. This can easily save you tens of thousands of dollars. If we use the same example above and sell a home for $350,000 your savings in commission fees would be around $13,250. You would still owe taxes on the commission fee. So add another $663 to that for a grand total of $13913. These figures are based on British Columbia average rate fees.
So by selling your home yourself and saving $13,913. Putting 20% down for your down payment and saving $10,473.75. You can save $24,386.75 in this one deal alone.
I am not a rocket scientist or a math major but I can already tell that these types of savings are a no brainer when it comes to any kind of real estate transaction.
This one technique can save you thousands of dollars.