Dad's new house by flickr user Patrick Haney

Buying a New Home ...

or is renting a better idea?

When deciding to buy or rent a home, we need to look at numerous non-financial as well as financial factors.

First of all, the location of the house is generally not a factor. You can usually find a suitable house to rent or buy in the location of your choice. Also, the cost of utilities (telephone, hydro, water, TV) will be the same whether you rent or buy.

Buy or Rent a Home?

When deciding to buy or rent a home, we need to look at numerous non-financial as well as financial factors.

First of all, the location of the house is generally not a factor. You can usually find a suitable house to rent or buy in the location of your choice. Also, the cost of utilities (telephone, hydro, water, TV) will be the same whether you rent or buy.

Buy or Rent a Home?

LOCATION

Happy new ... by flickr user uncommon

When deciding to buy or rent a home, we need to look at numerous non-financial as well as financial factors.

First of all, the location of the house is generally not a factor. You can usually find a suitable house to rent or buy in the location of your choice. Also, the cost of utilities (telephone, hydro, water, TV) will be the same whether you rent or buy.

Buy or Rent a Home?

LOCATION

LOCATION

Happy new ... by flickr user uncommon

When deciding to buy or rent a home, we need to look at numerous non-financial as well as financial factors.

First of all, the location of the house is generally not a factor. You can usually find a suitable house to rent or buy in the location of your choice. Also, the cost of utilities (telephone, hydro, water, TV) will be the same whether you rent or buy.

Buy or Rent a Home?

LOCATION

LOCATION

LOCATION

Happy new ... by flickr user uncommon

Some things to keep in mind if you rent are:

1. You need to pay monthly rental payments in advance, and probably also one month's rent in advance as damage deposit. You do not, however, need to pay a large down payment and the various fees required when buying.

Some things to keep in mind if you rent are:

1. You need to pay monthly rental payments in advance, and probably also one month's rent in advance as damage deposit. You do not, however, need to pay a large down payment and the various fees required when buying.

2. Renting a home is cheaper in the short term than buying, but it does not create any assets.

Some things to keep in mind if you rent are:

1. You need to pay monthly rental payments in advance, and probably also one month's rent in advance as damage deposit. You do not, however, need to pay a large down payment and the various fees required when buying.

2. Renting a home is cheaper in the short term than buying, but it does not create any assets.

3. You need to know what is included in the rental payment. For example, are the utilities (especially water, hydro, heating) included? Is the home furnished or partly furnished?

Some things to keep in mind if you rent are:

1. You need to pay monthly rental payments in advance, and probably also one month's rent in advance as damage deposit. You do not, however, need to pay a large down payment and the various fees required when buying.

2. Renting a home is cheaper in the short term than buying, but it does not create any assets.

3. You need to know what is included in the rental payment. For example, are the utilities (especially water, hydro, heating) included? Is the home furnished or partly furnished?

4. If you buy a house, the value of the house normally increases with time. If you rent a house, the rental payments will increase over time, and you do not create any assets.

1. There may be restrictions to your lifestyle if you rent. For example, you may not be able to have pets in a rented home, or modify the home to suit your personal needs.

Some non-financial factors to consider when renting

1. There may be restrictions to your lifestyle if you rent. For example, you may not be able to have pets in a rented home, or modify the home to suit your personal needs.

2. You are not responsible for repairs, maintenance, or property taxes. For example, if the hot water tank needs replacing, the owner is responsible.

Some non-financial factors to consider when renting

1. There may be restrictions to your lifestyle if you rent. For example, you may not be able to have pets in a rented home, or modify the home to suit your personal needs.

2. You are not responsible for repairs, maintenance, or property taxes. For example, if the hot water tank needs replacing, the owner is responsible.

3. If you need the home for only a short time, it may be better to rent so that you can avoid the inconvenience and expense of reselling the home.

Some non-financial factors to consider when renting

1. There may be restrictions to your lifestyle if you rent. For example, you may not be able to have pets in a rented home, or modify the home to suit your personal needs.

2. You are not responsible for repairs, maintenance, or property taxes. For example, if the hot water tank needs replacing, the owner is responsible.

3. If you need the home for only a short time, it may be better to rent so that you can avoid the inconvenience and expense of reselling the home.

Some non-financial factors to consider when renting

Now, we will look at the costs associated with

buying and renting a home.

Banks and other lending institutions have developed a formula that allows you to calculate the maximum price of a home you can afford. This formula is known as the Gross Debt Service Ratio, or GDSR. According to this formula, anyone buying a home should spend no more than 32% of gross income on household or accommodation expenses, including mortgage payments, property taxes, heating and condo/strata fees. The formula may be written as:

"How Much Can I Afford to Pay for a Home?"

Find your maximum mortgage amount and monthly payment

Lucy Brown wants to buy a condo, but does not know how much money she should spend based on her income. She earns $44 000 per year, and has saved $9000 for a down payment. The property taxes for the condo she likes are $1500 per year, and the heating costs average $90 per month. The condo/strata fees are $180 per month. The bank will give her a 25-year mortgage at an interest rate of 7.5%. What is the maximum price she can afford for a condo, based on spending no more than 32% of her gross income on household and accommodation expenses?

N=I%=PV=PMT=FV=P/Y=C/Y=PMT: END BEGIN

Lucy Brown wants to buy a condo, but does not know how much money she should spend based on her income. She earns $44 000 per year, and has saved $9000 for a down payment. The property taxes for the condo she likes are $1500 per year, and the heating costs average $90 per month. The condo/strata fees are $180 per month. The bank will give her a 25-year mortgage at an interest rate of 7.5%. What is the maximum price she can afford for a condo, based on spending no more than 32% of her gross income on household and accommodation expenses?

Lucy Brown wants to buy a condo, but does not know how much money she should spend based on her income. She earns $44 000 per year, and has saved $9000 for a down payment. The property taxes for the condo she likes are $1500 per year, and the heating costs average $90 per month. The condo/strata fees are $180 per month. The bank will give her a 25-year mortgage at an interest rate of 7.5%. What is the maximum price she can afford for a condo, based on spending no more than 32% of her gross income on household and accommodation expenses?

N=I%=PV=PMT=FV=P/Y=C/Y=PMT: END BEGIN

Thomas plans to attend university for the next three years, and needs a laptop computer priced at $2850.00 plus PST and GST @ 7% each. The company that sells the computer will finance it at 7.25% over three years (36 monthly payments). He is also able to lease the computer for 36 months at $107.93 per month.

4. How much more expensive is leasing than buying? Suggest some reasons Thomas might have for leasing even though it is more expensive.

3. The lease does not require a down payment, and the computer has no residual value at the end of the lease. What is the interest rate charged on the lease?

2. What is the total cost of leasing the computer?

1. What is the total cost over a 3 year term of buying the computer, including all finance charges?

HOMEWORK

PMT = $100.69, Total Cost = $3624.84

Total Lease = $3885.48

Interest = $636.48

Leasing is $260.64 more expensive.e.g. Repairs responsibility of Lessor.

Additional Costs When Purchasing a Home1. Appraisal fees

Additional Costs When Purchasing a Home1. Appraisal fees

2. Inspection costs

Additional Costs When Purchasing a Home1. Appraisal fees

2. Inspection costs

3. Property survey

Additional Costs When Purchasing a Home1. Appraisal fees

2. Inspection costs

3. Property survey

4. Insurance costs for high ratio mortgages

Additional Costs When Purchasing a Home1. Appraisal fees

2. Inspection costs

3. Property survey

4. Insurance costs for high ratio mortgages

5. Home insurance

Additional Costs When Purchasing a Home1. Appraisal fees

2. Inspection costs

3. Property survey

4. Insurance costs for high ratio mortgages

5. Home insurance

6. Land transfer tax

Additional Costs When Purchasing a Home1. Appraisal fees

2. Inspection costs

3. Property survey

4. Insurance costs for high ratio mortgages

5. Home insurance

6. Land transfer tax

7. Interest adjustments

Additional Costs When Purchasing a Home1. Appraisal fees

2. Inspection costs

3. Property survey

4. Insurance costs for high ratio mortgages

5. Home insurance

6. Land transfer tax

7. Interest adjustments

8. Prepaid property taxes and utilities

Additional Costs When Purchasing a Home1. Appraisal fees

2. Inspection costs

3. Property survey

4. Insurance costs for high ratio mortgages

5. Home insurance

6. Land transfer tax

7. Interest adjustments

8. Prepaid property taxes and utilities

9. Legal fees

Additional Costs When Purchasing a Home1. Appraisal fees

2. Inspection costs

3. Property survey

4. Insurance costs for high ratio mortgages

5. Home insurance

6. Land transfer tax

7. Interest adjustments

8. Prepaid property taxes and utilities

9. Legal fees

10. Sales tax (GST on new homes)

Additional Costs When Purchasing a Home1. Appraisal fees

2. Inspection costs

3. Property survey

4. Insurance costs for high ratio mortgages

5. Home insurance

6. Land transfer tax

7. Interest adjustments

8. Prepaid property taxes and utilities

9. Legal fees

10. Sales tax (GST on new homes)

11. Moving expenses

Additional Costs When Purchasing a Home1. Appraisal fees

2. Inspection costs

3. Property survey

4. Insurance costs for high ratio mortgages

5. Home insurance

6. Land transfer tax

7. Interest adjustments

8. Prepaid property taxes and utilities

9. Legal fees

10. Sales tax (GST on new homes)

11. Moving expenses

12. Service charges

Additional Costs When Purchasing a Home1. Appraisal fees

2. Inspection costs

3. Property survey

4. Insurance costs for high ratio mortgages

5. Home insurance

6. Land transfer tax

7. Interest adjustments

8. Prepaid property taxes and utilities

9. Legal fees

10. Sales tax (GST on new homes)

11. Moving expenses

12. Service charges

13. Immediate repairs

Additional Costs When Purchasing a Home1. Appraisal fees

2. Inspection costs

3. Property survey

4. Insurance costs for high ratio mortgages

5. Home insurance

6. Land transfer tax

7. Interest adjustments

8. Prepaid property taxes and utilities

9. Legal fees

10. Sales tax (GST on new homes)

11. Moving expenses

12. Service charges

13. Immediate repairs

14. Appliances

Additional Costs When Purchasing a Home1. Appraisal fees

2. Inspection costs

3. Property survey

4. Insurance costs for high ratio mortgages

5. Home insurance

6. Land transfer tax

15. Decorating cost7. Interest adjustments

8. Prepaid property taxes and utilities

9. Legal fees

10. Sales tax (GST on new homes)

11. Moving expenses

12. Service charges

13. Immediate repairs

14. Appliances

Additional Costs When Purchasing a Home1. Appraisal fees

2. Inspection costs

3. Property survey

4. Insurance costs for high ratio mortgages

5. Home insurance

6. Land transfer tax

15. Decorating cost7. Interest adjustments

8. Prepaid property taxes and utilities

9. Legal fees

10. Sales tax (GST on new homes)

11. Moving expenses

12. Service charges

13. Immediate repairs

14. Appliances

The Dirksons Additional Costs to Purchase Their Home

The Dirksons live in Brandon and bought a house in Portage. They had the home appraised and paid $125.00 to have it done. The bank required a survey, and the cost of the survay was $300.00. the price of the home was $135 000.00, and since their down payment of $20 000.00 was less than 25% of the total price, they had to buy “High Ratio Mortgage Insurance” at a cost of 1.25% of the mortgage. The home insurance premium was $475.00 but they recieved a $150.00 rebate from the policy they had on their home in Brandon. The property taxes for the year had been paid by the previous owner, and so they owed 7 months of the total tax bill of $2 125.00. A dry-walling bill of $650.00 was split equally between themselves and the former owner. The Dirksons bought a used washer and dryer for $920.00. Moving expenses were $320.00 and legal fees that included the land transfer costs were $965.00.

HOMEWORK

A group of rural students is planning to go to university. One of the members of the group suggests that they purchase an older home rather than rent an apartment. After a careful analysis of their finances, the group decides that their gross monthly income would be around $3000.00. Monthly property taxes are estimated to be $125.00. Heating bills are estimated to be $150.00. The group can arrange a mortgage at a rate of 9%. The three members of the group are able to come up with a down payment of $8000.00. Determine the maximum affordable purchase price that can be considered if they take out a 25-year mortgage.HOMEWORK