Do Renting and Mortgages Really Equal Out to About the Same?
We’ve talked a lot on this blog lately about how the idea of home ownership has become the be-all-end-all for many Canadians, or at least how many of the experts think it has anyway. Delving deeper into that idea, one of the reasons why many Canadians seem so obsessed with the idea of owning a home versus renting one is because “a mortgage would cost about the same as monthly rent.” Indeed this is one of the biggest arguments towards home ownership. But, is it really true?
Sadly, it’s not, even in rural areas where home prices and rent values are relatively low when compared with more urbanized areas. But as you do get nearer to those big cities, the discrepancy between buying and renting becomes even clearer, and the gap wider. Take into consideration along with that the fact that owning a home simply comes with more expensive costs than renting one, and it’s plain to see that the cost of renting does not always equal the cost of home ownership.
Let’s take renting and buying in Ottawa for example. Rent on an average two-storey home here is around $1,500 (if you can find something reasonable.) When first looking at the average condominium, which costs around $300,000, it may at first seem like the two would just about equal out – especially if you assume that the buyer has already saved up a down payment of $25,000.
But that $275,000 mortgage would break down to a monthly mortgage payment of about $1,600. At just about $100 more than renting, but with the added bonus of building equity in a home, it would be easy to say that owning here makes more sense than renting and have that be the end of the argument – and the beginning of the push for home ownership.
But not so fast.
Along with that $1,600 mortgage payment, the homeowner is also going to have condo fees, and those average about $200 or $300 a month. Add property taxes onto that, and that $1,600 monthly home ownership cost can total over $2,000. And that $500 difference between owning and renting in this instance can be significant for many people. And those choosing a single detached home over a condo will most likely face even higher home maintenance fees, as well as a bigger mortgage payment.
So does the cost of renting always equal out to be about the same as owning a home? Well it turns out, not always. Home ownership has many benefits over renting, but cost differences aren’t always one of them. And if it’s your ultimate argument for diving into home ownership, you better at least make sure the numbers really are going to add up. Or in this case, that they aren’t.