Thinking out loud - Buying an apartment vs renting
Thinking out loud – Buying an apartment vs renting
Current rent: $800
Electricity not included (hot water tank and heaters are both electric)
Possible down payment ~ $43,500 = 30%
Amortization period: 25 years
Mortgage rate: 3%
Mortgage term: 5 years
Estimated mortgage payment: $480.34/month
Maintenance fee: $155.00/month
Scenario #2
Same apartment but with amortization period of 20 years
Estimated mortgage payment: $561.97/month
Maintenance fee: $155.00/month
Mortgage + maintenance: $716.97/month
The question I am asking myself is whether it would make sense to buy the apartment instead of continuing to rent?
My question is made harder by the fact that I will potentially be moving to a different country sometime next year though that is not by any means a sure thing. Perhaps I could live in the apartment until that occurs and then rent it out to someone who would pay my mortgage for me until I return or until I decide on something else. The apartment that I am looking at is not the exact one I am in now but one on a different floor in the same building. It is almost nicer
than the one I am currently renting and I believe if I were to rent it out I could
bring in more than the $800/month that I am paying. There are a few units
posted for $950/month but even $900 seems to be easily attainable.
There is really only one thing that I am worried about with this purchase and that is a special
assessment that requires the replacement of an expensive piece of common
property – most likely the roof as this building is 30 years old. While I
wouldn’t be stretched incredibly thin by the mortgage payment, the downpayment
would comprise almost all of my savings and not leave any room to pay for a
one time cost in the thousands to repair something substantial.
Does anyone have any advice for my situation? It would be much appreciated.
Not that anyone is actually reading this...
*The above tables are from the Mortgage Calculator on https://www.realtor.ca.
Hey, not sure if you've already made a decision on this. But, I feel like you should hold off on the buying for now. It seems like a really rushed decision that, as you have stated, would eliminate your entire savings. With the market being incredibly volatile as it is...it wouldn't be the best strategy to withdraw all your savings right now and pour it into another risky investment. What's your reason for purchasing other than being a homeowner? Cause' honestly with everything that you've stated, it's pretty clear that renting is the best way to go at this moment.
ReplyDeleteIf you are still contemplating...try out this nifty calculator:
http://www.getsmarteraboutmoney.ca/tools-and-calculators/buy-or-rent-calculator/buy-or-rent-calculator.aspx#.VhiL0PlViko
It compares the cost of owning a home to the cost of renting one where you are currently located.
Hey, I appreciate your comments and I think you're probably right. I would feel uneasy putting all of my savings into the one asset. I think I will be waiting a while for my life to settle down before making any decisions. Thanks again.
DeleteIn my personal opinion, the option of buying or renting does not entirely depend on your finances alone. There are many other factors which need to be considered as well. If you were to buy a house, it becomes your asset and when the market value increases, you can sell it off for a much cheaper house to gain some profits. However, if you were to rent, you can expect to see yourself moving ever so often as a rental lease does not last that long. On the other hand, as an owner you would need to pay tax, buy insurance, and so on; but as a renter, you do not need to settle all that. Hence, it all eventually boils down to your objective in life.
ReplyDeleteThanks for your comments Marciowilges. I've been thinking about the same things you mentioned and really what my objective is. To be honest I'm not quite sure yet and thought it would help by thinking it through. I think it shows that I should be waiting for a while until I have more things under control. Thanks again.
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