somewhere earlier in this or another thread, someone provided an excelled calculation showing how much money you spend on mortgage+maintenance+bills compared to renting.
It's really simple to figure out, if you take your time to actually think, before listening to people who are already in the marker/realtors/mortgage brokers. All those people have a financial interest in the market and want you to be in it too.
I'll do the calculation using some recent sales
1 Bedroom apartment in Burnaby, 655 sq feet, purchased for $340,000
20% down payment = $68,000
3.0% interest rate locked in for 5 years.
Mortgage payment is $1,287.14
Strata maintenance fee is $202.30
Bills for hydro, water, TV, internet = $200/month roughly
Property tax $1,500/year or about $125/month
Total cost for the apartment per month is $1,814.44 give or take a few $
Now that same exact type of 1 bedroom 650 sq ft apartment can be currently found on craigslist for $1200/month, including utilities, tv, internet.
So right there, you are saving $600/month by "paying some assholes mortgage"
Now lets look at the actual cost of your mortgage
Here's a breakdown of the first 5 years
Year..........Total Paid..........Interest Paid..........Principal Paid..........Balance
Year 1..........$15,446.76..........$8,008.39.......... $7,438.37..........$264,561.63
Year 2..........$15,446.76..........$7,783.53.......... $7,663.23..........$256,898.40
Year 3..........$15,446.76..........$7,551.92.......... $7,894.84..........$249,003.56
Year 4..........$15,446.76..........$7,313.29.......... $8,133.47..........$240,870.09
Year 5..........$15,446.76..........$7,067.48.......... $8,379.28..........$232,490.81
Totals:.........$77,233.80..........$37,724.61.... ....$39,509.19..........$232,490.81
So, in 5 years, you paid $37,724.61 in interest, $1,500*5 for property tax, assuming it doesn't increase = $7,500, $12,138 in strata fees, assuming those don't increase, $12,000 in utilities cost, for a
total of $69,362.61 . Let's compare that to the total amount you spent for rent in 5 years, even if it was increased every year by 3%
Year..........Rent Per Month..........Total
Year 1..........$1,200....................$14,400
Year 2..........$1,236....................$14,832
Year 3..........$1,273.08................$15,276.96
Year 4..........$1,311.27................$15,735.27
Year 5..........$1,350.61................$16,207.33
Total.......................................$61,59 4.84
So, already you have saved $7,767.77 by paying "some assholes mortgage" over 5 years.
Now, lets say you took that $68,000 down payment, and purchased some GIC's... current 5 year rate is 2.750%, paid on maturity. That would make you $1870 per year * 5 years = $9,350
So, after 5 years, you are $17,117.77 further ahead.
Also, let's say you could actually comfortably afford to pay the mortgage + utilities + strata fees + prop taxes. You pay your $1,200 rent and put the rest of your savings from paying rent into a saving's account. $600/month * 12 months * 5 years = $36,000 in savings, without any interest.
Now, some will say, "well that's great, but after 5 years, I'm in the same spot as before I rented, I have no equity."
well let's see. In 5 years you paid $39,509.19 toward your principal. You still owe $232,490.81 for your 1 bedroom 650 sq ft apartment.
You decide to sell your apartment. As per a comment earlier, chances that the value of your apartment actually increased at all, are very slim, but let's say you got lucky and it went up by 5%. Now your apartment is worth $357,000. You magically sell it at full asking.
Here's the calculation of what you're left with:
Selling Price $357,000
Your realtor's commission $7,312
Purchaser's realtors's commission $6,113
GST On commission $671
You are left with $342,904
You pay off what you owe on your mortgage, you are left with $110,413.19.
Out of that, your original down payment was $68,000, $39,509.19 was what you've paid off in 5 years, your profit = $2,904.00.
Compared to, you paid rent for 5 years, your $68,000 made you $9,350 and you have at least $36,000 in savings, equaling to $113,350
so in reality, you end up in a
BETTER spot, and you take virtually no risk compared to the risk of the price of your 1 bedroom 650 sq ft apartment crashing... which over the course of 5 years is about 40%, according to the logic posted earlier
Food for thought.... by the way I forgot to include the purchase tax, but let's say you are a first time buyer and you get a break