Owning a home compared to renting

Even in a strong market like ours, there are still some savers out there that prefer to hold on their cash than to put those funds to work with buying a home. Lets have a quick look at comparing owning vs. renting.

To be more accurate for the first time buyer, let’s compare a home valued at $270,000 as most of my first time buyer clients are buying between $220,000 and $320,000.

A two to three bedroom townhouse, is currently renting in Red Deer for about $1,350-$1,900, based on information I found on Kijiji, which is going to put us in the average of $270,000 range.

If you were to purchase the home for $270,000, you would have a payment of only $1,276/month (plus taxes and utilities), based on a 25-year amortization, 5% down payment and an interest rate of 2.99%.

If values went up even only 1%, you’d earn $2,700 on your property, but you’ll also have paid down your mortgage about $9,000, and after the fifth year, you’ll have paid it down over $40,000!

And if values only went up 1% a year for five years your home would be worth $283,500 earning you equity of just over $52,000, can you do that renting?

What I haven’t mentioned yet is the savings that today’s interest rate environment offers you.

Pre-recession interest rates were much higher than today’s, and the average 10-year interest rate before September 2008 was 5.35% (Statscan) for the same fully discounted wholesale rate that’s offered today, go back 20 years for the same period, and the rate is 5.80% (Statscan).

Your parents would tell you even that is a great interest rate!

The same $270,000 house, if rates went back up to 5.35% would cost you an extra $265/month if that was the only thing that changed, meaning an extra $13,600 in the first five years…and that’s all interest cost – which no one likes, and banks love!

Obviously the benefits of owning far outweigh those of renting and interest rates are still amazingly low, if you have the ability to purchase, now’s a great time to do some market research to see if owning is for you.

Jean-Guy Turcotte is an Accredited Mortgage Professional with Dominion Lending Centres – Regional Mortgage Group.

Just Posted

Red Deer’s newest outdoor ice facility opens to the public this week

The speed skating oval at Setters Place at Great Chief Park will be open Dec. 17th

Yellow Vests protestors take to Red Deer streets

Trudeau government’s immigration and oil industry policies denounced at rally

Rebels lose to Medicine Hat Tigers, 4-1

Tigers break Rebels’ three-game winning streak

Exhibition explores the rich history and culture of Métis people

The exhibition is on display from Dec. 15th to March 10th at the Red Deer Museum + Art Gallery

2019 Hockey Alberta Provincial Championship host sites announced

A total of 39 Provincial Championships will be hosted across the province

Trudeau to make it harder for future PM to reverse Senate reforms

Of the 105 current senators, 54 are now independents who have banded together in Independent Senators’ Group

Canada’s ambassador meets with second detainee in China

Global Affairs says John McCallum, Canada’s ambassador to China, met with Spavor Sunday

World Sikh Organization demands Canada prove Sikh extremism is a threat

Sikh community says this is first time such extremism has been mentioned in federal terror-threat assessment

Light at the end of the tunnel for UN climate talks

Meeting in Katowice was meant to finalize how countries report their emissions of greenhouses gases

Supreme Court affirms privacy rights for Canadians who share a computer

Section 8 of the Charter of Rights and Freedoms protects Canadians against unreasonable search and seizure

Janet Jackson, Def Leppard, Nicks join Rock Hall of Fame

Radiohead, the Cure, Roxy Music and the Zombies will also be ushered in at the 34th induction ceremony

‘I practically begged’: B.C. woman with breast cancer denied referral to Calgary

Breast cancer patient left to fight disease alone after being denied referral to Calgary

Facebook reveals bug gave apps unauthorized access to 6.8 million users’ photos

It’s believed up to 1,500 apps built by 876 developers had access to Facebook Stories, private photos

21 detained before Paris protests as police deploy in force

There was a strong police presence outside the central Saint Lazare train station, where police in riot gear checked bags

Most Read