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:
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.
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.
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.
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.
Your total monthly expense will be about $1,450.00
Breaking Down the Factors – Owning:
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.
Taking 1% tax rate – monthly tax payment will be $140.00 per month.
We are just assuming a condo fee of $300.00 per month.
All will be same as apartment except for $100 electricity per month. Heating is included.
It is included in the mortgage.
Closing cost of about $2,320.00, lump-sum
$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.
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.