Rent vs. BuyShould you rent or should you buy your home? It takes more than looking at your mortgage payment to answer this question. This calculator helps you weed through the fees, taxes, and monthly payments to help you make a good financial decision.
Definitions
- Price of home
- Purchase price of the home you wish to buy.
- Cash on hand
- Cash you have for the down payment and closing costs.
- 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
- This calculator calculates GST at 6% 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 $7,560. For homes between $350,000 and $450,000, the maximum rebate of $7,560 declines to zero on a proportional basis. All homes selling for more than $450,000 receive no GST rebate.
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. 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.
- 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 both offer Mortgage Loan insurance.
| 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% |
| Up to and including 100% (0% to 4.99% down payment) | 3.10% |
*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. An additional .6% is added to all mortgages with amortizations of 36 years or more.
This calculator assumes the following:
- That financial institutions will not charge any Mortgage Loan insurance Premium if your down payment is 20% or greater.
- 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.
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 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
Acceptable loan purpose:
- Property purchase
- Purchase Plus and Insured Progress Advance
- Available for extended amortizations up to 35 years (refer to 30/35 Year Product Overview for premium schedules)
Ineligible loan purpose:
- Business for Self (Alt A)
- CreditAssist
- CreditAssist for Self-Employed
- Family Plan
- First Mortgage Owner Occupied 3 and 4 units
- HELOC
- New To Canada
- Secondary homes
- Vacation Homes
- Homebuyer 100
Eligible properties
- Maximum two units, one of which must be occupied as the principal residence
- New construction or existing properties
- Loan-to-value ratio limits: 'Loan-to-value' (LTV) is the relationship between the principal balance of a mortgage and the property value. For example, if you have a house valued at $100,000 with a $90,000 loan, you have a 90% LTV ($90,000 divided by $100,000 = 90%). For one and two units - 95% LTV
Eligible equity sources
- Lender cashback incentives
- Equity borrowed from any source that is arm's length to the purchase or sale transaction, including personal loans, lines of credit or credit cards. Loan repayments must be included in the TDS calculation.
- Gifts or grants from any party that is arm's length to the property purchase transaction
- Rent to own payments that exceed a reasonable current market rent
- Down payments may not be paid out of or included in the insured mortgage, including any recovery of lender cashback incentives.
Ineligible equity sources
Some equity sources are not eligible. These include sources that are not arm's length or that are tied to the purchase or sale of the property, either directly or indirectly. For example:
- Builder incentives or loans
- Realtor/ mortgage broker incentives or loans to the borrower that impact the property selling price
- Loans/ gifts from the seller of the property (the vendor)
- Third parties that receive payment from the vendor or the builder
- GDSR: Gross Debt Service Ratio
- Compares the total cost of your monthly mortgage payment, taxes and heating to your gross monthly (pre-tax) income from all sources. The general rule is that these monthly payments should not exceed 32% of your gross income.
- TDSR: Total Debt Service Ratio
- Examines the relationship between all monthly debts (i.e. mortgage payments, property taxes, cars, credit cards, other loans and obligations, etc.) and your gross monthly income. The general rule is that these total monthly payments should not exceed 40% of your income.
- Qualify amount
- Shown as "Total monthly payment." This is the total amount you qualify for per month. This amount is the total of "Principal, Interest, Tax and Heat" for your home.
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Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We can not and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.
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