Costs of renting vs buying should be reviewed
Friday Jun 29th, 2018Share
Current rent = $1800 per month = $21,600 annually that renter will never see again
Current rent = $1200 per month = $14,400 annually that renter will never see again
A mortgage of $250K = $1181* in mortgage payments monthly ($7,336 year 1 interest payments – this number decreases as years go by, good, and also about ½ of the lower rent figure above, and $6836 in principle amount repaid annually and this number increases as years go by- good)
A mortgage of $300K = $1418* in mortgage payments monthly ($8803 in first year interest payments –$8203 in principle amount repaid)
A mortgage of $400K = $1891* in mtg monthly ($11,738 in first year interest paid, and $10,954 in principle amount repaid)
(*using today’s 5 yr fixed rate and 25 year amortization)
Of course there are other costs that must be taken into account such as;
· Property taxes
· Maintenance fees
· Upfront purchase costs – 5% minimum down payment, and approx. 1.5% for legal fees, land transfer tax (% of purchase price)
BUT in general, the costs work out much in favour of buying if a client plans on living in the home for a while - especially with today’s very low mortgage rates!
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