With the cost of everything increasing, it is amazing how the housing prices are literally exploding! Rental prices in Peel are only beginning to show signs of the rapid increase, but the Toronto markets are already feeling it. Below is an example of what that means to you in dollars and cents! **Example as of March 15, 2017 using a home in Brampton, ON**

5 Year Comparison: Rent vs. Purchase

Market rent of a home valued at around $600,000.00 would be around $1,800.00 per month

$1,800.00 x 60m = $108,000.00

Return on investment: 0%

Purchase with 5% down payment (Total amount required upfront - $30,000.00 down payment; $9,000.00 closing costs) **Property taxes are estimated at approximately $3,600.00 per year for this type of property.

Using the current average insured mortgage interest rate of 2.69%, the numbers would be as follows:

$ 2,708.05      - Mortgage Payment
$ 300.00        - Property Taxes
$ 3,008.05    + Utilities would be your approximate monthly payments

$3,008.05 (Monthly Payments) - $1,800.00 (Market rent) = $1,208.05 in additional payments per month than if you were renting.

$1,208.05 additional payments per month x 60 months = $72,483.00 in additional payments than if you were renting over same term.

Return on investment breakdown:

+ $ 375,000.00         - Using 12.5% annual increase (The Brampton house used for this example increased 25.86% in the past 6 months)
+ $ 89,031.23          - Amount paid down to mortgage over same 5 year term
$ 464,031.23 equity increase

Total Amount invested over term: $72,483.00 (additional payments) + $39,000.00 (down payment and closing costs) = $111,483.00

$464,031.23 (equity increase) - $111,483.00 (amount invested) = $352,548.23 estimated net return over 5 years

Annual return on investment each year: 33.00%

**Each monthly payment in the scenario above of $3,008.05 pays down an average of $1,524.20 towards principal, makes the effective “rental amount” in this scenario $1,483.85 per month. ($3,008.05 {monthly payments} - $1,524.20 {principal} = $1,483.85 per month)

**Please note: A combined household income of approximately $130,000.00 per year is required for qualifying for this type of purchase based on current regulations for qualification and credit of both borrowers.

Contact Kristen Gignac, Experienced Mortgage Broker for all your commercial and residential mortgage needs across Etobicoke, Toronto, Pickering and surrounding areas.

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