Rent vs. Buy

Should you rent or should you buy your home? It takes more than looking at your mortgage payment to answer this question. The first steps in buying a house are ensuring you can afford to place at least 5% of the purchase price of the home as a down payment and determining your budget. This calculator helps you weed through the fees, taxes and monthly payments to help you make a good financial decision.

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*Mortgage Insurance is usually required with a down payment of 20% or less - Please call us for further information

Definitions

Price of home
Purchase price of the home you wish to buy.

Cash on hand
Cash you have for the down payment and all closing costs. You can purchase a home with as little as 5% down payment with mortgage loan insurance. An ideal down payment is between 10 - 20% of the purchase price of the home.

Interest rate
The current interest rate you can receive on your mortgage.

Amortization period
The number of years over which you will repay this mortgage.

Property tax amount
The annual amount you pay in property taxes.

Mortgage fees
Fees your financial institution charges for originating your mortgage.

Maintenance/Condo Fee
Monthly fee charged for your condominium and any other maintenance costs you expect to incur with the ownership of this home. Please note that condominiums are referred to as "strata" in the Province of British Columbia.

Other closing costs
Estimate of all other closing costs for this loan. This should include filing fees, appraiser fees and any other misc. fees paid.

Total closing costs
Total up front costs to close your loan. This is the sum of the loan origination fee, the amount paid for mortgage insurance premium and other closing costs.

Mortgage amount
Total amount for this mortgage.

After-tax investment return
Annual percentage return you would retain, after income tax was paid, if you invested your closing costs and down payment instead of purchasing a home.

Monthly rent payment
Amount you currently pay for rent per month.

Expected inflation rate
Inflation rate used to adjust amounts subject to annual increases. This includes rent, insurance and tax payments.

Home appreciates at
Annual appreciation you expect in the home you are purchasing.

Future sales commission
The percent of your homes selling price you expect to pay to a broker or real estate agent when you sell your home.

GST
Many new homes have the purchase price with GST and/or HST/PST included. If this is the case for your home purchase, the checkbox to include GST should be left unchecked since the GST and/or HST/PST will be included in the purchase price.

This calculator calculates GST at 5% of a new home's purchase price minus a GST rebate. GST rebates are calculated as follows. For homes under $350,000, the rebate amounts to 36% of GST, up to a maximum rebate of $6,300. For homes between $350,000 and $450,000, the maximum rebate of $6,300 declines to zero on a proportional basis. All homes selling for more than $450,000 receive no GST rebate.

It is important to be aware that there may be additional taxes on new home purchases in the form of HST and/or PST, depending on the province where the purchase is made. These additional taxes are not included in this analysis.

For more information, please visit: http://www.cra-arc.gc.ca/E/pub/gp/rc4028/rc4028-e.html#P103_1775

Mortgage Insurance Required?
Check this box if you wish to calculate the amount of mortgage insurance payable. For additional information regarding mortgage insurance please read the definition below.

Mortgage Loan Insurance Premium (non-refundable)
Mortgage insurance makes it possible for homebuyers to purchase a home using a lower down payment. The Canadian Bank Act prohibits most federally regulated lending institutions from providing mortgages without mortgage loan insurance for amounts that exceed 80% of the value of the home or purchases with less than 20% down payment. The Canadian Mortgage and Housing Corporation (CMHC) and Genworth Financial are two companies that offer Mortgage Loan insurance. For more information please visit their websites at www.chmc.ca and www.genworth.ca.

CMHC and Genworth Financial's current Mortgage Loan insurance Premium Rates*:
Loan Size
(% of property value)
Rate (as a % of loan)
Up to and including 65% (over 35% down payment)
0.5%
Up to and including 75% (25% to 34.99% down payment)
0.65%
Up to and including 80% (20% to 24.99% down payment)
1.00%
Up to and including 85% (15% to 19.99% down payment)
1.75%
Up to and including 90% (10% to 14.99% down payment)
2.00%
Up to and including 95% (5% to 9.99% down payment)
2.75%
Up to and including 95% Flex Down or Cash Back Equity Owner-Occupancy Program** (5% to 9.99% down payment)
2.90%

*An additional 0.2% is added to all mortgages with amortizations of 26 to 30 years. An additional .4% is added to all mortgages with amortizations of 31 to 35 years.

This calculator assumes that your mortgage insurance premium can be financed by your mortgage, which can greatly reduce the amount of upfront money that is required to purchase a home.

This calculator does not include Genworth's Top-up Premiums or Blended Amortization for refinancing.

**Not all Financial Institutions offer CMHC's Flex Down and/or Genworth Financial's Cashback Equity Owner-Occupancy Program.

Below is a brief summary of the two programs:

    CMHC's Flex Down
    Own your own home sooner by using a wider range of sources for your down payment. If you have a proven track record of meeting your debt requirements and sufficient income to support mortgage loan payments, your lender may be able to provide you with CMHC's Flex Down product. Sources for your down payment can include: borrowed funds, gifts and lender cash back incentives. For more information please see: http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_005.cfm

    Genworth Financial's Cashback Equity Owner-Occupancy Program
    Some home buyers have an excellent credit history but have not yet saved the required down payment. Others have used their savings to build assets in different ways. Genworth Financial offers mortgage default insurance to both these groups. For more information please see:http://www.genworth.ca/mi/eng/industry_professionals/premiums.asp