The “rent versus purchase” number crunch is a classic for those who are tired of renting and wondering if it might be more cost effective to buy a property in the long run. When you’re crunching those numbers, however, watch out for these hidden scenarios.
You only calculated your mortgage costs. Surprise! You might find your mortgage calculation to be shockingly low, giving you even more incentive to start hunting for a purchase; however, if you’re only looking at mortgage payments, you should know that they only make up part of your monthly carrying costs. You’ll also have to take into account property taxes, homeowners insurance and—if you live in a condo—maintenance fees. All of these could easily add another $1,000 or more to your monthly carrying costs.
You forgot about closing costs. During the actual purchase, there are a lot of costs that can be overlooked. These include things like home inspection fees, property transfer fees, legal costs and the costs associated with packing and moving. These may not end up being a deal breaker, but it’s a good idea to plug them in while doing calculations too. If you’re buying a newly-built home or condo in Canada, you might be on the hook for occupancy fees, money you have to pay to the developer (similar to rent) until the building is officially registered and your mortgage becomes valid.
Neither of these things necessarily mean you shouldn’t consider buying a home, but they’re important to remember so there are no unwelcome surprises once you make an offer!