The Canadian Press article By David CoteThe Toronto StarThestar.caSeptember 11, 2018″If you have a $500,000 to $1 million condo in Toronto, you’re probably not going to make much money on it,” said Jim Clements, managing partner at investment management firm Corona Capital.
“But the upside is a big one.”
A $1-million condo loan can be a lot cheaper than a $50,000 mortgage and can also offer a bigger return, according to Corona.
It’s also more flexible, Clements said, because it can be done at any time of the year or month.
“You can’t get the interest rate and you can’t pay the monthly payment upfront.
You can just pay off the whole thing in full, and you have the opportunity to take advantage of the discount in the spring,” he said.
Clements recommends anyone with a condo to get a loan of $1.5 million or less, but he says you could also get a $750,000 loan and get an additional $100,000 return.
For the average mortgage student, a $2,500 loan is a better option than a one-time payment, he said, as it gives you the ability to borrow at a higher rate over a longer period of time.
Clement says it’s also possible to reduce your mortgage costs if you have more money in savings than you spend.
“There’s no need to buy a house.
There’s no reason to buy anything,” he added.”
So it’s much better to borrow than to buy.
And if you borrow a little bit more, that’s a lot of money that you can put toward a retirement nest egg.”
Getting startedClements says if you’re a newbie to investing, it’s worth getting started by doing a basic financial literacy test and applying for a bank loan.
“I think it’s probably the most important step you can take to get started,” he explained.
“First of all, you want to know your savings levels.
I would say you should have a minimum of $100 per month in savings.””
Then you need to be able to handle the stress of trying to pay off a $5,000 deposit in the first month,” he says.
Cases where a loan can pay off faster than a house buyClements said he sees more than 1,000 people with a mortgage in Canada that can pay back a $10,000 or more loan faster than an investment.
“That’s because the loan is structured so that if you can pay the loan off in the beginning, the interest will come out of the savings you make,” he noted.
“In fact, if you make the mortgage in three years and you repay it in five years, you’ve got a lot more equity to pay it off in three or four years.”
Clements also points out that a condo loan has an additional advantage if you live in Toronto and have more than one income earner, as a condo is more affordable than a traditional mortgage.
“If it’s an income earNER, then you have some savings that are in the condo,” he told CBC News.
“And if you are an income-earner, then it makes sense for you to be looking at the condo loan because it will be more affordable.”
“If the condo is in a good neighbourhood, then that will make it easier for you.
You will be able more easily access that money,” he adds.
A few things to considerThe maximum interest rate for a $550,000 condo loan is 3.25 per cent, Cements said.
But if you want a lower interest rate, Chens says you’ll want to consider the cost of the condo.
“Typically, when a condo comes up for sale, it costs about $300,000,” he suggested.
“We’ve seen condos come in for sale that cost $300 million to $400 million,” he continued.
“To buy the condo, you will need to pay $300 to $500 million.”
“So if you need $50 million for the condo and you don’t want to have a mortgage, you can buy it for $100 million or $150 million,” Clements added.
It can be more expensive than a mortgageIf you want an affordable condo, consider taking out an equity loan instead, according the Toronto Real Estate Board.
“This is another way of saving money,” Cenges said.
“If you take out an asset-backed mortgage, the principal and interest will be paid off in one or two years, so it’s really more like a mortgage.”
“And there are other things you can do with it,” he also added.
“The key thing is you need the equity to get it done.”
You’ll also need to make a few extra paymentsClements suggested that you use a tax-advantaged loan, rather than a conventional loan, in order to save on your mortgage payments.