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  1. #16
    CaLoonie
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    Quote Originally Posted by kanewtz View Post
    I agree that renting is way cheaper than owning.

    However, renting to me is throwing your money away. Owning is building equity.

    Well here in the Lower Mainland, rent is insanely high and since most rental units are condos or basement suites, you're paying enough to cover the owners mortgage, strata fees, and property taxes + profit. Meaning Rent is > then mortgage.

  2. #17
    CaNewbie
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    Quote Originally Posted by kanewtz View Post
    I agree that renting is way cheaper than owning.

    However, renting to me is throwing your money away. Owning is building equity.
    Quote Originally Posted by kanewtz View Post
    You have a valid point, however, renting is throwing your money away. Its like leasing a car. In the end, you gain nothing and are just "renting" the space you live in.

    That is how I see it anways. While, I understand not everyone can afford to own. If they could, people wouldn't rent.

    I pay roughly 2500/month in mortgage, tax, utilities. I know you can get an apartment for quite cheaper than that and I looked into it.

    I agree with you also that with the markets and ridiciously priced homes, that renting might be the "better" alternative. Same goes with the lifestyle of the individuals.

    But, you cannot tell me for one minute that renting is not throwing your money away. I am talking literally here. Unless you rent to own, you will be gaining nothing and simply "renting" space to occupy.
    As long as you are not mortgage-free, the home technically belongs to the lender. In order for you to build equity, the property must appreciate in value every year. If the home doesn't appreciate in value, the cost of borrowing erodes the principal you paid off. The situation becomes worse when housing values decline because now you're paying interest on a depreciating asset.

    If you calculate the cumulative interest charges on a typical property in the GTA ($350,000 price, awfully cheap but just for argument's sake), the average consumer pays, based on 25 years amortization, hundreds of thousands in interest by the time the home is paid off. Also note that when housing prices appreciate, property taxes also rise to keep the market balanced. You should also factor into account that most utility bills tend to increase every year. The belief that owning a property means tax-free appreciation is somewhat misleading.

    So while the property may have appreciated by 2% to 3% per year during the time of ownership, how much money have you lost, taking compound interest into consideration, over all these years paying interest which doesn't build up equity at all?

    That's why I tell clients whenever we meet that if they want to save themselves some money, pay off the mortgage aggressively at the beginning of the term when the allocation to interest is greater. The problem is very few people actually do it.

    I really hope that people who are consider home ownership won't be fooled by the ridiculous rate of appreciation that we have seen over the past 7 or 8 years. Such rate of appreciation is abnormal and eventually there will be a major correction. Those who purchased at the peak will pay a steep price.
    Last edited by lior; Fri, May 6th, 2011 at 08:55 PM.

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