The Mathematics of Mortgages
Updated: Sep 24, 2021
Mortgage Math Breakdown
To rent or to buy, 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.
Purchase of $100,000 condo:
Mortgage payment $462
Condo Fees 270
(life, disability, home)
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 principal decreasing, this homeowner has increased their net worth by $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 homebuyer initiative which would further decrease the monthly mortgage amount.
We have looked at homeownership simply in terms of 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!