Mississauga home – To buy or rent ?
There is a common myth that it is cheaper to rent a Mississauga home than buy one.
Sometimes renters wait for prices to fall before investing. Well, it is time to take a closer look at the numbers and judge for yourself.
I would say that the overall market is stable and the future looks good. The GTA condo apartment market looks very stable as per, 1st Quarter 2014 GTA condo apartment market report.
When you look at the long-term savings, there is more to gain when you buy. But not many see it that way, even if they are earning well.
Just last week a young renter, a financial planner by profession, approached me on securing his first job in Mississauga Square One area. He earns well, has excellent credit score and is single. His income can qualify him for a $250K home. Looking at his credentials, I suggested that he buy a Mississauga home instead of renting. He declined saying that he preferred to buy a Mississauga home only after he had saved up enough over the next five years. His planning did not impress me. Coming from the finance field, I felt he should know better. His job was to help people build their savings. When it came to his finances, he did not seem to follow what he preached. At the same time I respect his views, every person has a right to make his/her own opinion.
I strongly believe that charity begins at home. So this is how I can gently explain. This person had the ability to make a 5%down payment right then. This amounts to about $12,250 for a $245,000 condo (I can help you buy some fantastic condos in Mississauga that are newly built), that he was planning to rent in Square One for $1,350 per month. If he were to buy a home, he would have ended up paying $1,556 per month (based on 2.5% variable interest per year, 25 year amortization, bi-weekly payments, $300 condo fee per month and $180 per month in property taxes).
Let us assume this Mississauga home appreciates by 15% in the next 5 years. This means that the property could easily be worth about $281,700 then. On selling five years later, taking into account the 5% in real estate fees and other costs, he would be left with $70,333 ($281,700, less $14,085 less $197,329 (balance of mortgage).
This equity build-up of some $70,000 in just five years is not easy for many earning between $50,000 to $60,000 gross yearly income in the real world. After 5 years, this person could simply put down this equity for a freehold Mississauga home. The $70,000 equity, plus his other savings could help him buy his Mississauga home sooner than he imagined.
The point I am trying to make here is that renting makes little sense when you have good credit and a decent, stable job.
Many tenants plan to save more before venturing into buying. Sure, it makes sense to pay more down payment when it comes to buying, as a smaller mortgage loan translates into lower monthly payments. But it might not make sense if property prices keep moving up faster than one can save. It is also very hard for most people to keep finances on track.
Sometimes other expenditures such as family holidays, shopping expenses or other luxuries eat into savings for a Mississauga home and buying takes a back seat. This is the reason why some people stay tenants forever.
Look at the numbers and take an informed decision! At the end of the day, this is your money! Isn’t it wiser to make it grow?
Call me if you plan to buy a home and wish to stop throwing away your savings on rent.