The Mathematics 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.
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.
If you were to look for a condo to purchase for $100,000
Mortgage payment $462
Condo Fees 270
Insurance – 100
life disability, home approx
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.
Purchase of $175,000 townhouse
Home Maintenance 100
Given the property value increase and the mortgage principle decreasing, this homeowner has increased their net worth $30,480
Purchase of a $300,000 home
Home Maintenance 150
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.
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!