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House hacking Canada

How to Live for Free? How to own your home for little or no mortgage?

My life would probably be quite different if I really knew this strategy in my early twenties. If you are thinking about buying your home, or your next home, or want to buy a home but aren’t financially ready to yet, this post is for you all.

It’s called House Hacking aka Living literally for free aka Own your house for little to no mortgage.

It’s when you buy a home and then rent out rooms or a portion of the home. Now if you are thinking, “Who wants roommates, eh?”

Wait till it gets interesting…

1. Let’s look at my own younger life as an example.

When I first arrived in Ontario, Canada, as an immigrant, the average rent was $1500, and home prices for a three-bedroom, two-bathroom house were around $250,000.

I lived there for 28 months (2 years and 4 months). Now, if I had decided to put a first-time home buyer down payment (5%) on a house to buy it, here’s what the purchase and mortgage would have looked like if I had known about house hacking:

Home Purchase Price: $2,50,000
Down Payment (First Time Home Buyers 5%): $12,500

25 year mortgage with an interest rate of 4.54%
Total Mortgage Payments Principal & Interest plus CMHC insurance: $1373 monthly

Total monthly rents: $1500

Instead of paying $1500/month in rent to live, I could have been collecting $127/month. (rent minus monthly mortgage payments).

As you can see from my real life example, one of the primary goals will be to reduce or eliminate your housing payment. 

Here are a few more benefits of house hacking:

  1. Owner-occupants get the best financing terms and lower interest rates than investment financing. If you keep the property as a long-term rental, this is a huge benefit because you can keep the owner-occupied loan in place even after moving out.
  2. Smaller down payments are possible. As a first-time home buyer, you can finance the property with as little as 5% compared to typical investment loans,

which require a 20% minimum down payment minimum.

  1. When you house hack, you are acting as a landlord, which is the first step toward becoming a real estate investor. House hacking is a hybrid of a residence and an investment. You live in the property while learning to invest. Everyone makes mistakes while learning, but it’s easier to recover when you’re on site and personally involved.
  2. You are smoothly transitioning into rental properties. When you live in a house, you get to know it well. You also get to know the type of tenants your property attracts. So, once you move out, you will have an increased comfort level with the property and your tenants as a landlord. With your low-interest loan, you’ll likely also generate the best possible cash flow from the property once it’s fully rented.

House hacking is when you buy a home, residence and use rental income to supplement mortgage payments.

By purchasing a larger home and renting out rooms, or buying a small multifamily home (1-4 units) and renting the other units out, you can either shave off all or most of your monthly mortgage payments, or even make a profit every month.
Depending on the loan terms, you can legally buy another property (as your primary residence and take advantage of the low down payment) and use the first home as a rental investment after 1-3 years of living in the home.These rents will continue to help cover all or most of your next home mortgage.
This process can literally be repeated every few years.
Of course, you must do your research and run the numbers for yourself. 
But With proper research and due diligence, deals can be found in any location and market, and house hacking can work for you. 

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    Manju Shree
    Manju Shree
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