Many of us clearly remember our parents telling us at some point in time that it is better to own than rent – don’t pay off someone else’s mortgage. They could not have been more correct, which often makes us wonder why so many people choose to rent when owning a property can be so financially rewarding.
What we have come to understand is that many people don’t realize that if you can afford to rent, chances are that you can afford to buy. In fact, you may be surprised by just how much house you can afford while keeping your monthly payments the same.
With Calgary’s vacancy rates remaining low, and net migration continuing to be high, renting can be expensive and options may be limited. The best rental units get swooped up within days of being listed, and the most desirable locations come at a premium. Yet, there are many great condos available for purchase in the same areas that would be less expensive to own.
In most cases it is both cheaper and easier to buy than to rent. From a financial standpoint, building equity is far better than paying down someone your landloards mortgage. From a convenience standpoint buying also has its benefits.
Financially, all that is required to purchase a home rather than renting is a down payment, stable income, and good credit. The down payment can come from an RRSP, savings, or even a gift from a family member.
Someone who is paying $1500 a month, which would be pretty typical rent for a two bedroom apartment in Calgary, could purchase a property for as much as $315,000 and pay approximately the same amount of money every month. The required down payment would be only a little over $15,000, and with every monthly payment $675 of the mortgage would be paid down. Even those with the most modest math skills can figure out that retaining $675 worth of equity every month is far better than paying off your landlords mortgage.
Furthermore, it is easier to find a $315,000 condo in Calgary to buy right now than it is to find a really nice $1500 a month apartment to rent. Just ask anyone who has tried to rent an apartment lately. Furthermore, once you have found a property to buy, you no longer need to worry about being evicted, your lease ending, or your landlord selling the place. A condo or home that you own is a far more certain place to live than one that you rent.
Nolan Matthias holds a bachelor of arts in Economics, is the co-founder of Mortgage360 and the author of The Mortgaged Millionaire. Call Nolan at 403-615-6132 with your questions or to set up an appointment with an Accredited Mortgage Professional (AMP).
