Mortgage v/s Renting - Real Life Experiences
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Posted on: 01-03-04 13:10:12
Dear Mr. Chopra,
I had sent you a mail regarding buying a house in GTA, few days ago. Since I haven't heard back from you yet, I just wanted to confirm if you had recieved the mail or not. Please let me know of the same.
Looking forward to hearing from you soon,
Thanking You,
Sincerely,
DT
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Quote:
Orginally posted by DesiTiger
Dear Mr. Chopra,
I had sent you a mail regarding buying a house in GTA, few days ago. Since I haven't heard back from you yet, I just wanted to confirm if you had recieved the mail or not. Please let me know of the same.
Looking forward to hearing from you soon,
Thanking You,
Sincerely,
DT
Hi Mr. Desi Tiger,
I was away for the weekend. I did receive an email ( I presume from you) on 28th Feb which I have just replied. However, since I did not know it was from you and was not aware of the location of the sender, I supposed that the sender is from India and my answers would reflect that. Please read the email and let me know if it answered your questions to your satisfaction. If not, please send me another one and now I would have your location in mind before answering.
Thanks and regards.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
Mortgage payments for 5 years. $400 X 130* = $52,000
Property tax for 5 years =$ 7,200
Maintenance fee for 5 years $240 X 60 = $14,400
Heating costs for 5 years $120 X 60 =$ 7,200
Land transfer tax & lawyers fee =$ 2,200
Maintenance over a 5 year period =$ 1,000
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Total =$84,000
Gr8 lets have some more of this pertaining to real life scenarios.
Pramodbhai ek badi line aap bhul gaye (shayad maine nahi padha) aapka 5% ka muddal ...your down payment sir?
plus 2-3 saal se real estate market mein aaglagi hai
kab tak market growth sustain kar sakta hai?
abhi bhi kai properties acchi location mein 4 month se bikti nahin
krupya same rate rahain buyin aur sellin ke time to kitnaa loss hoga ye batayein taki risk facto kitnaa bada hai ye malum padey
im sure one has to also consider living in that property for 4-5 years to create equity
kindly comment
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Quote:
Orginally posted by bumbaya
Mortgage payments for 5 years. $400 X 130* = $52,000
Property tax for 5 years =$ 7,200
Maintenance fee for 5 years $240 X 60 = $14,400
Heating costs for 5 years $120 X 60 =$ 7,200
Land transfer tax & lawyers fee =$ 2,200
Maintenance over a 5 year period =$ 1,000
----------------------------
Total =$84,000
Gr8 lets have some more of this pertaining to real life scenarios.
Q.
Pramodbhai ek badi line aap bhul gaye (shayad maine nahi padha) aapka 5% ka muddal ...your down payment sir?
Ans.
Yes you are right.. You missed this point in my reply. I did mention that If I had not made the down payment and invested the same in a conservative fund, I would have earned approximately 6% p.a. (before tax) $ 2966 which after tax would have been app. $ 2,000.
Hence total cost of owning the house would have been = $86,000
The total rent paid in 5 years would have been = $72,000
Extra paid in owning in comparison to renting = $14,000
Q.plus 2-3 saal se real estate market mein aaglagi hai
kab tak market growth sustain kar sakta hai?
Ans.
Yes the prices have been rising for the last couple of years. There are certain reasons for that. First being low rates of interest, 2nd being lot of influx of new immigrants with loads of money & the better shape of economy since 1997 onwards. No body can tell for sure for how long the market would rise but now we are seeing the trend that it is sort of stabilizing, and that's good otherwise the prices may start coming down. Though it may not happen in near future. Generally the rates come down when the interest rates are high and there is less demand for house ownership.
Q. abhi bhi kai properties acchi location mein 4 month se bikti nahin
krupya same rate rahain buyin aur sellin ke time to kitnaa loss hoga ye batayein taki risk facto kitnaa bada hai ye malum padey
Ans.
Yes if you have a property in an undesirable location, if might stay in the market for
More than 4 months and may not fetch you a good price. In real estate it is always location, location & location. Then comes the demand.
Q. im sure one has to also consider living in that property for 4-5 years to create equity
kindly comment
Ans
If the property rates remain the same over 4-5 years of time, then you may not make money in equity but would still have paid down some equity and would still be a little better off in comparison to renting. Moreover, I have not considered in my reply anywhere that you would be renting a part of basement (if you own a house with basement apartment) which would give you some additional income and would make you come out a winner in comparison to renting.
I hope these are the answers you were looking for.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
Thanks for your time and efforts.
Wishing that all desis make the most of their hard earned money.
Most of the profit taking would come if they get out of the market at the right time.
Also your point about low mortgage rates is very tricky as just like the cycle theory in any business ..in this business its the first time buyer who doesnt have sufficient funds for down payment and borrows those 5% for downpayment and pays cmhc insurance ..is most likely to get trapped as today he moght be able to well compare to your initially tag line
"Is buying real estate better than renting" but in the event that U S starts doing assembly jobs mainland, immigration gets to be burdensome to the govt and ot raises points and thanks to frank n factual forums like CD people are more realistic in choosing whether to bring in and invest their hard earned savings to invest in this economy ,things would definitely turnaround
just a thought of it gives jitters:
condo worth 175000 today is worth 140000
mortgage rates are in the vicinity of 8%
firts time buyer buys house on cash back no deposit making him borrow 190000 instead of 175000
his monthly installment and utilities and maintenance touches 1700 from 1100 n unless he is in a good job his pay remains @ $12-15per hour and take home @ 2000 dollars per month.
We are just trying to see the break even as we are talking about the first time home owner who doesnt have his own money to invest here.
Now could you kindly comment on the figures.
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Hi Bumbaya,
In my very first reply in this thread, I said that only those people who are paying high rent and can afford to pay so should go in for their own house.
I am pasting a part of that answer here for quick reference.
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Hence, I would strongly suggest those people who are paying a high rent and can afford paying the same easily, should take advantage of lowest interest rates in the last 50 years and should go for a house by locking for at least 5 or 7 years mortgage. However, each person’s case is different. Every one has his own priorities and compulsions and if any one needs any help or further clarification, I can do an assessment of his/her situation and advise if he/she would be better off renting or buying. My service/advice is free to all fellow desis.
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No where, I mentioned that every one must go in for a house. In certain cases it may not be prudent for those people who are either sharing accomodation, paying cheaper rents in basement apartments, single or do not have a very good stable job with permanent income. Every body's case is different.
Secondly, no body..., not even Governor of Bank of Canada (who just dropped the Banks overnight landing rate today again by .25%) can predict what the rates of interest would be in future. These rates are affected by so may factors which include economy, inflation, world situation, job situation, bond market, demand & supply for housing etc. etc..
Thirdly, why do you think that you have to sell the house to make money. You can always borrow against your own equity and invest (the interest you paid on borrowed funds for investing would be a tax write off) in securities, equities and stocks and bonds etc. or can pay for your kids education and some unexpected expenses on illness etc.
Fourthly, If you are a self employed or have some sort of business in which you use part of your home as home office, then you can write off partial expenses of your insurance, maintenance & mortgages against your business income.
There are so many ways to take advantage of the house and the equity therein, which you can only understand if you pay fees to the 'financial planner' and not by getting a 'free advice' on this forum as people generally do not value 'free advice'.
Regards,
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
I agree with Pramod, every investment has its ups and downs, only a professional financial adviser would be able to determine the right investment for an individual.
Could other members also share their factual experiences about their owning a house !
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Sunil Sharma, P.Eng.
