To Rent or Not to Rent?

A number or present factors are instigating this thought – Should I Rent or Buy? This question depends on the future results of our actions. Future is mostly unknown and any prediction ends with the qualifier borrowed from probability theorem.

A good approach is to check the numbers. Comparing costs of both the cases will present us with an idea about the present condition.

To Rent or Buy – Factors:

Let us take future out of our equation – including price correction and interest rate volatility. Let’s assume that all positive and negative chances are the same. Once we take the major uncertainty away, then we have a logical base to base our numbers on.

Breaking Down the Factors – Apartment:

Rent:

To rent a two bedroom Apartment in downtown and in suburb would not cost the same. Let us assume that it costs about $1,200.00 per month. Not the greatest and not that bad either.

Parking:

Let us be fair, we know that you have to pay for the parking garage. It will cost a tenant about $100 a month. You can save that money by looking for a free parking ones but often those parking’s are outdoor.

Storage:

We all carry some amount excess baggage. Most of those can be dumped but due to many reasons we decide not to part with it. A small storage cost you about $150.00 a month.

Utilities:

That is the sweet part. Basic utilities like Electricity and water are free. TV used to be free but now you get some OTA channels only – therefore you will rent a cable or satellite box.

Total:

Your total monthly expense will be about $1,450.00

Breaking Down the Factors – Owning:

Mortgage:

A two bedroom Condo – say $150,000.00. Add $20,000.00 for a decent storage space. Since you are buying this for the first time – you pay only 5% down plus closing costs. Your mortgage payment based on a 5 years fixed rate of 3% – will be about $778.49 per month – including CMHC.

Municipal Tax:

Taking 1% tax rate – monthly tax payment will be $140.00 per month.

Condo Fees:

We are just assuming a condo fee of $300.00 per month.

Utilities:

All will be same as apartment except for $100 electricity per month. Heating is included.

Storage:

It is included in the mortgage.

Not Included:

Closing cost of about $2,320.00, lump-sum

Total:

$1382.00 per month.

Although we assumed the condo prices to be $150,000 = depending upon where you want it – may change the price. If you decide to move further then add your commuting cost to it.

Conclusion:

By logically balancing between your need and want – you can save a lot of money. In our typical example buying may seem to be a viable option but depending on your situation the scenario may change.

A decision is easier to take when we remove the unknowns. Yes there is a fair bit of chance that the house prices may fall in future – but ask yourself – if the price of your home is going to drop or not. Experience suggests that – the affordable the property is – less is the chance of it losing its market value.