Buying a Condo Versus Renting an Apartment 

BUYING

Example:

Condo purchase price = $300,000

5 year fixed rate 2.99%  

Total due on signing

o Down payment 5% = $15000

o Deed transfer tax(1.5% of purchase price) = $4500

o   Lawyer fees = $800

o   Total up front costs = $20,300

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o   CMHC fees (added to loan amount to be financed)  = $8977.50

Balance Remaining to be mortgaged= $293,977

Monthly Carrying Costs

Mortgage Payment = $1390

o   Interest paid = $728

o   Principal paid =$662

Condo Fees = $425

Property Tax = $250

Total Carrying Costs = $2065

In 5 years, loan will be paid down (principal paid $662 x 60)  = $39720  

Balance of loan Remaining after 5 years = $293,977 - $39720 = $254,257

Estimated condo value 5 years (3% appreciation) = $347,666

Equity gained = Appreciation ($347,666) - Balance Remaining on loan ($254,257) = $93,409 – upfront costs (down payment, deed transfer tax and lawyer fees = $20,300) = $73,109

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RENTING


Renting Similar unit at 1400 sq feet = $1500 per mth

$1500 * 60 = $90000

Monthly-added cost when purchasing a condo versus renting = $565($2065-$1500)

Monthly carrying costs of a condo = $2065 - $1500(renting) = $565 per month to invest X 60 months = $33,480

If renting, over a five year period you would have $33,480 to invest plus your initial up front costs of $20,300 for total of  = $53,780

If you were to invest this money $53,780 ($896 X 60mths)in a GIC at 3% annual interest rate you would make $8250 in five years.


BOTTOM LINE


When purchasing a condo your equity gained at the end of 5 years = $93,409 – upfront costs $20,300 – extra monthly costs to own versus rent $565 X 60 = $33,900.

By paying the upfront costs of $20,300 and paying an extra $565 per month to buy a condo, with a modest appreciation of 3% per year you stand to gain $39,209 after 5 years

By renting for $1500 a month.  You would have the initial up front costs of $20,300 plus the extra monthly carrying costs of a condo $565 X 60= $33,480 for a total of $53,880 to invest which would yield you a return over 5 years of $8250

In this scenario buying a condo at today’s current interest rates and Halifax’s steady price appreciation would be the best choice for the greatest return on investment.