Island Savings

Get ahead with rental income

Ever thought about rental income as your ticket to financial freedom?

Life without a mortgage seems like an unattainable dream for many as the price of a home continues to rise in many parts of BC. One way to become mortgage free sooner that’s really starting to gain traction is to purchase a home with a rental suite or add one to your existing home.

Rental income can help you pay down your mortgage years sooner. Paying $1500/month on a $300,000 mortgage at 3.09% interest will take over 23 years to pay off and cost you almost $121,000 in interest.

If you factor in $850/month of rental income to the equation and subtract $200 for expenses, you would still be able to put an extra $650/month towards your mortgage. You’ll pay off your house in just over 14 years—nine years sooner—and save almost $60,000 in interest.

Paying off a mortgage later in life can have far reaching implications, including decreased retirement savings and added financial stress. It may even mean delaying retirement or downsizing before you’re ready.

There are only two options to speed up debt repayment and increase savings—earn more or spend less. Everyone is looking to earn more and isn’t easy, but generating some rental income is fairly simple. In addition to the extra income, there is the added benefit of being able to claim tax deductions related to the maintenance expenses for your suite.

It isn’t all easy street though, you’ll need to make sure your suite is noted on your home insurance and that you are in compliance with the bylaws your city or municipality has about rental units. You’ll also want to make sure you’re aware of any tax implications that come with rental income.

Some people are intimidated by the thought of finding tenants and being a landlord, but there are some great resources out there to help you, like the Residential Tenancy Branch website from the BC Government. If you are considering purchasing a home with a rental unit, a knowledgeable real estate agent can also be a good source of information.

There is real financial freedom when you no longer have that monthly mortgage payment. It allows you to save more for retirement and goes a long way towards reducing financial stress. It may seem like a faraway dream, but the addition of rental income can make mortgage free living a reality more quickly than you ever thought possible.

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Whether you’re looking for more information, or you’d like to let us know how we can serve you better, we want to hear from you.

Contact us today to find out how we can make things simple for you!