The Math of Mortgages

To rent or to buy, that is the age-old ongoing question. If we take the emotion out of the equation and choose to see this decision as purely about the numbers, then the choice becomes clear. 

Condo: If you are currently renting an apartment, then the condo market may be the place for you. Maintenance free living certainly does have its benefits 

An average apartment in Red Deer is going for $950/ month. In most cases the heat, water and waste are covered. 

Rent                                     $950 

Power                                      50 

Insurance                                25 

Laundry                                   25 

Total                                  $1050  

If you were to look for a condo to purchase for $100,000 

Mortgage payment              $462 

Condo Fees                              270 

Taxes                                           76 

Power                                          50 

Insurance –                               100 

life disability, home  approx 

Total                                         $958 

Keep in mind: 

The property value will increase, and the mortgage balance will decrease. This means after just 5 years the condo owner has increased their net worth by $15,600 by choosing to spend the money they were already spending in a different way. 

Townhouse: 

Rent                                           $1100 

Utilities                                         400 

Insurance                                       40 

Total                                         $1540 

Purchase of $175,000 townhouse 

Mortgage                                 $810 

Taxes                                          175 

Insurances                                 200 

Utilities                                      400 

Home Maintenance                   100 

Total                                       $1585 

Given the property value increase and the mortgage principle decreasing, this homeowner has increased their net worth $30,480 

Full House: 

Rent                                           $1650 

Utilities                                          500 

Insurances                                      40 

Total                                          $2200 

Purchase of a $300,000 home 

Mortgage                            $1388 

Taxes                                       250 

Insurances                              250 

Utilities                                   500 

Home Maintenance                150 

Total                                    $2538 

This person would see a net worth increase of $48,680 in just 5 years!!  If they were willing to purchase a home with a legal suite renting for $800/month, they could have a lovely bank balance of $48,000 (less expenses) which invested at 6% return could generate an additional $7,859 in interest putting them at $104,539 in increased net worth in just 5 years paying for something they are already paying for. 

None of these scenarios consider the first-time home buyer initiative which would further decrease the monthly mortgage amount. 

Condo              $33/month 

Townhouse    $51/month 

House              $86/month 

So, we have looked at home ownership simply in terms of the math and the math does not lie. Call me today and let’s look at your numbers to see what we can do for you!