We've never bought a house in the US, but I know enough about it to see that Canada is a bit different. I know Wikipedia isn't always the most reliable information source, but here is an interesting comparison nonetheless:
While homeownership rates in both countries are very high compared to worldwide (or even developed countries), the United States has a slightly higher level of homeownership at 68.9% versus 67% for Canada.
The narrow gap is interesting as the U.S. has implemented many incentives for homeownership, whereas Canada has no notable incentives. The most notable U.S. incentive for homeownership is the tax-deductible mortgage interest expense. In Canada, and many other countries, there is a prevalent view that this market distortion unfairly penalizes renters, who often have less income than owners.
I'm not sure how many Americans realize how unusual this tax deduction is--I know the UK had no such thing either--does anyone know of another country that does?
Some other differences:
*In Caronport, few people use a realtor. Most home sales are private, and the deal is then drawn up by a lawyer.
*We can make extra payments toward the mortgage, but if we pay off the mortgage early (even due to selling the house) then we pay a penalty worth 3 months of mortgage interest, unless we take on another mortgage with our same bank (Royal Bank of Canada).
*Most mortgages have a term of 3-7 years with the same interest rate, and then we take on another one. Our house should be paid off in 25 years, or perhaps a bit less, as we opted for a biweekly payment.
*I'm still pretty amazed that the bank gave us a mortgage at all, given that we are living here on one-year work permits until we gain permanent residency!
Doing the impossible
1 day ago
12 comments:
Do you know if you got a lower interest on the loan due to the early payment penalty?
(Just out of pure curiousity....)
And Americans SHOULD hire a lawyer to draw up home sales. It really is the best, safest route to go!
I'm not really sure. I know that taking a 5 year term had a lower interest rate than a 3 year term did.
Hi Erin: To answer your friend Camille, there is likely no lower interest rate offered due to the early payout penalty. In Canada very little is set up for home owners to get a break, and it usually only happens if the banks see a rise in interest rates early into your longer term mortgage payment option than they were expecting when you signed it. Occasionally the interest rates go up during your 5 year term that will save you a few dollars but in the end the best way to save on your interest is to pay mortgage payments on a weekly basis. Even 2 payments a month will cut your actual interest payments. That way you are putting more on the principle in a shorter period of time.
Sue B.
Hi there !
My friends are the same (I'm French, moved to Ontario). They really want to buy a house in Canada, and they looove the market prices compared to France ! Seems to be much easier to own a place here, although I don't plan to buy anytime soon yet...
Thanks for the explanation Sue!
Thanks for visiting the blog Zhu! I don't know about the rest of Canada, but surely on the prairies, housing is much more affordable than the last couple places I've lived (Chicago, Illinois and Edinburgh, Scotland).
Erin, I'm happy to read you are buying a home there! I'd love to see some photos. Just now tapped into your blog and will have a look round more. :-)) Kerry
Thanks Kerry! I love reading about your life in the Netherlands on your blog!
That is a very different way of banking than in the States. How interesting! I wonder if it is modeled more off of the British system of banking?
I was thinking about the home buying incentives in the U.S. My guess/thought is that the goal of giving a tax break to homeowners is so that the renter can become the homeowner. I know I have quite a few friends who wouldn't be able to afford their homes without that tax break. Although, I do wish I could write off part of our rent!
Yes, I think the tax deduction was designed to encourage homeownership. So it's interestg the ownership rates in Canada are so similar!
Some of the people commenting have mentioned home prices in Canada. Well, rising home prices is a natural phenomenon in cities that are expanding, improving, and becoming more and more livable. Seemingly it is a contradiction, because the higher the prices are the more difficult it is to buy a decent property in the given city. So you may argue that thus the city is becoming less and less livable. Well, there really is a price you have to pay to move to, or continue living in, the city. Toronto and Vancouver are no exception.
But I still don't think our city would soon become one for multimillionaires only.
Hello. Well, of course that the prices are higher in Toronto or Vancouver, but as the Toronto real estate said, that is the general tendency in big cities. I also agree with Camille that the banking system is very different form the American one as well as many other things including the health insurance, health care etc.
Take care,
Jay
This seems to be an incredible source for home listing,flat fee mls listing No Additional Listing Fees – No Junk Fees – No Hidden Charges – No Back End Listing Commissions! List for up to 1 year on the MLS,Make free changes to your long island MLS listing anytime! with http://www.Flatfee199.com
Post a Comment