Saving for a Home with RentFund

Right now, saving for a home, or even just saving money in general, is a stretch for over 50% of Canadians. This is happening because the cost of living has increased dramatically, with one of the biggest bills being rent payments. This leaves very little room for savings and has caught many Canadians in the rent cycle. In fact, over 9 million Canadians believe they will never own a home and have to rent forever. So, in this article, we're going to break down how anyone can save and become a homeowner with RentFund (of course 😉).

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Put on your math cap because we'll mostly be looking at real-world numbers as of December 2024.

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To make this more engaging, I'll tell a story. This is fictional, but I'm using REAL NUMBERS, so let's not forget that!

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It all started with an idea. Jeff wanted to buy a home for himself and start a family. Jeff works a good job as a mechanic and makes $3,966.64 per month after tax. He has a stable job and makes the average income in Canada. His basic expenses every month are $1,445.70, not including rent. Jeff lives in Calgary, Alberta, in a 2-bedroom apartment and pays $2,011 per month in rent. He likes living there but knows that if he wants to start a family, he'll need to venture into the crazy Canadian housing market and buy a home. This will give him more security, and he'll be able to build equity rather than throwing money away on rent every month.

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Jeff has been a RentFund member for the past two years and has verified his rent payments through the platform each month. He's also using the RentFund credit-building feature, which uses his verified rent payments to build his credit score. He knows he'll need decent credit when he buys a home. Over those two years, he verified $48,264 in rent payments and personally saved $12,238.66, which he invested in an FHSA at 7%, totalling $20,559.56.

He's looking at the current housing market in Calgary and is a bit discouraged by what he can afford. He really has two options...

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Option #1

Buy a newer home with a basement suite that he can rent out to help offset the mortgage costs. After all, that's what he's doing now in his current rental. He goes online and finds a new home in a great location for $675,000. He quickly grabs his calculator and starts crunching the numbers. He's a first-time homebuyer, so he qualifies for 5% down, which would be $33,750. He'll also need CMHC insurance since he's only putting 5% down, which would cost $25,650. This isn't an upfront cost but is paid over the 5-year fixed-rate term he's locking in. Jeff's total mortgage payment at a 4.65% interest rate would be $3,417. He knows this property has a legal one-bedroom basement suite that he can rent for $1,561 per month and already has a friend who wants to rent it. That brings his total payment down to $1,856 per month. He's excited about this because it's less expensive than his current rent, and he'll be building equity. Over five years, if his home increases in value at an average of 4%, it would be worth $821,240.71, and the total paid down on the mortgage would be $611,958.84. This would give Jeff a total equity of $209,281.87 over five years!

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Option #2

The next option for Jeff is to buy something within his budget that he can afford without renting out a portion. He knows that, on average, using a mortgage calculator, he could afford around $300,000 - $400,000 maximum. He puts that filter into a real estate website and finds mostly condos for sale. He takes out his calculator again and breaks down the numbers. He found a nice condo in a new building for $337,000. His down payment would still be 5%, totalling $16,850. His total mortgage payment at a 4.64% mortgage rate would be $1,706. This payment is much more affordable for Jeff to get started. But now, looking at the equity over five years, if the value increased by a modest 2%, the value would be $372,075, with the mortgage paid down to $305,526, giving Jeff total equity in the property of $66,539. It's not as much as the first property, but this option is less risky and more economical.

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Jeff has a major decision to make, so he heads out for a bite to eat with some friends to discuss his options. Most of his friends encourage Jeff to pick option #1, so he does. The only problem is his $20,559.56 in savings isn't enough to cover the $33,750 down payment; he's $13,190.44 short. But since he was a premium RentFund subscriber, he could get an additional $11,155 toward his home, leaving him just $2,035.44 short. So, he calls his friend to ask if he'd be willing to pay his damage deposit and first month's rent, and his friend agrees, giving him $3,122. Jeff uses that money to close on the home and is now officially a homeowner!

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This was a fictional story, but the numbers are accurate and would work exactly as outlined here. With RentFund, Jeff could become a homeowner. Not only that, but in five years, he'll have an additional $210,000 in equity. That's the power of ownership and building equity. So the question is should you be using RentFund? 

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Well, if you are renting but planning to own a home one day like Jeff, we think it's literally a no-brainer. You're basically getting free money at no risk to you. Give it a shot! We guarantee you'll get far more than what you are spending to be part of RentFund.