With the average price of a home in Calgary right now at around $340,000, everyone is looking for ways to make home ownership more manageable. One way to do this is by developing a secondary suite in your home. Not only will it make it easier to afford your monthly mortgage, it could help you pay off your mortgage faster. The demand for rentals in Calgary is high, and monthly rent ranges between $1,500-1,800. It doesn’t take a mathematical expert to see how that additional income could help you meet your financial goals.
Calgary’s rental market has been tight in recent years, and it is about to get even tighter. Students are returning and looking for housing only to find they are competing for rentals with displaced victims of June’s flooding. According to the Canada Mortgage and Housing Corporation, our city’s vacancy rate is the lowest in the country—right around 1 per cent.
How Do I Pay Off My Mortgage Faster?
Adding a rental suite to your basement can make home ownership more affordable for first time buyers and those who have owned for years. The basic facts of mortgage amortization are indisputable: the faster you are able to reduce your principal, the less you will pay in interest over time. If you can make extra payments through acceleration, you will pay less interest and get rid of your mortgage off sooner. Traditionally, many homeowners have shied away from renting out part of their homes due to inexperience, but when you consider the current market and the impact that potential income could have on your lifestyle, you may want to seriously contemplate the value of a secondary suite in Calgary.
To ensure the safety for all of Calgary’s secondary suites, homeowners are required to complete an application and meet the city’s building code requirements. But don’t be intimidated by the process. Even if your home requires renovation or improvements to bring it up to code, your Calgary mortgage broker can advise you how refinancing or obtaining a home equity loan can help you make use of your home’s untapped potential to earn income. Remember, by creating a rental suite, you will also be adding to your home’s value, allowing you to recoup your improvement costs.
Tips For New Landlords
Renting out part of your home can have repercussions on your whole life — not just your bank account and mortgage. Fortunately, there are many resources for landlords. Do your research, and be sure to talk to friends and family members with rental properties about their experiences.
- Your privacy is important. Design your secondary suite so you aren’t left feeling like your home is being invaded.
- Know the rules. Take the time to research Calgary’s bylaws for zoning, permits, and building and fire safety. Be sure you understand the laws of the landlord-tenant relationship.
- Avoid renting to relations. Any contract is complicated when personal connections are involved. If you rent to a cousin, and he can’t pay his rent, the collection or eviction process could damage your relationship and cause difficulties with other family members.
- Sign a lease. All adults living in your Calgary secondary suite need to sign your lease. Be sure to clearly specify the term, expectations, rules, and penalties for late rent.
- Set your rent at the middle or higher end of comparable properties. Research your area and what your property has to offer. If you set your rent too low, you will likely have higher turnover as your renters move on to the next cheaper option to arise. Stability makes your job as a landlord easier.
- Inform your insurer. Your insurance provider needs to know that you have renters on your property, and your coverage will need to be adjusted accordingly. If you fail to inform your insurer and damage or an injury occurred, your policy could be voided.
- Understand the tax impact. You will need to claim the rental revenue on your return. Down the road, if you sell the home, a portion of any capital gains could be taxable because you used the property for income.
Like many aspects of home ownership, incorporating a secondary suite into your Calgary home might seem daunting, but today’s housing market is perfect for new landlords. When you consider how much faster you will be able to pay off your mortgage, the challenge is certainly worth the time and investment. Remember how intimidating the thought of buying your first home seemed? Whether you need assistance with refinancing or a home equity loan to make renovations more affordable or an expert opinion on how to pay your mortgage off faster, Mortgages by Candice is here to help. Please contact us today for more information.