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Is Getting a Mortgage Cheaper Than Renting?

Choosing whether to buy or rent is not an easy question (even though every internet guru has an answer). 

Rather than get into the emotional weeds of having a mortgage versus renting, let’s look at the numbers instead. Is getting a mortgage cheaper than renting? 

Cost of Renting vs. Buying a Home

If we look at averages throughout Alberta, having a mortgage generally costs more than renting. 

There are so many caveats to this statement. The type of property, how many bedrooms, are utilities included, what is the interest rate etc. We’ll try to give apples to apples with our comparisons below, but just keep this in mind.

Let’s look at two examples across Alberta. 

The average rent for a single detached house in Edmonton is $1,750/month. The average monthly mortgage for a single detached house is around $2,220.57*

*Avg. home cost in Edmonton is $381,800. At 5%, 5-year fixed with a 25-year amortization.  

In another example, the average rent for a single detached house in Grande Prairie is $1,650/month. The average monthly mortgage for a single detached house is around $1,877.13*

*Avg. home cost in Grande Prairie is $322,750. At 5%, 5-year fixed with a 25-year amortization.  

Renting vs. Buying: Pros and Cons

When it comes to choosing between renting and buying a home, there are benefits and disadvantages to both options. Renting offers the flexibility of not being tied down to a long-term commitment and can be more affordable in the short term

When you rent, you don't have to worry about paying for repairs or renovations; your landlord or property manager will take care of that. And, because renting is generally cheaper in the short term, you'll have more money to contribute toward investments and retirement. Or let’s be honest, more fun things like travel and entertainment.

However, buying a home is all about the long term. You have to think about a mortgage and home as an investment vehicle. 

It’s all about building that equity. As you pay your mortgage down, and the value of your home goes up, you build that equity in your home. What can you do with this equity?

You can sell your home and keep the profit — tax-free we might add as long as it’s your primary residence — and travel the world. You can make your home worth more by completing renovations. You can even increase your own net worth by paying off debt. 

Again, if you’re all about cost savings right now, renting makes sense. But, if you want to build something long term, a real estate asset is the way to go.

Things to Consider When Buying a Home

When considering the cost of buying a home, there are several factors to take into account. Some of these costs you’re only going to experience a few times, depending on how long you stay in your home.

  • Down payment: The down payment on a home can be a significant expense, ranging from 5% to 20% of the purchase price. 

  • Closing costs: These one-time costs include home inspection, legal fees, moving trucks, home appraisal, and more.

  • Property taxes and insurance: Property taxes and insurance can add up over time. Usually, property tax rates range from .5% to 2.5% of your assessed home’s value.

  • Maintenance costs: Owning a home means you are responsible for any issues or upkeep on the property, which can get expensive. If you have an HOA, they may take care of some of the maintenance expenses, but this will still cost you a few hundred dollars per month on average. 

  • Time commitment: If you travel frequently or work long hours, home ownership may not be worth it. From housing projects and cleaning to lawn care and landscaping, most homeowners have an ongoing to-do list. 

Is it Better to Rent or Own a Home? 

There is no one-size-fits-all answer to this question, as it depends on your lifestyle, personal goals, and finances. While buying a home may be the better option for people with enough money for a down payment and closing costs, renting may be the best option for those needing more freedom and flexibility.

Here’s what we do know. You don’t know the math until you actually do the math…yes, those math classes you took in school can be used.

For the more “advanced math”, that is where you talk to one of our team members. They can look at how much you’re paying in rent now and evaluate if it makes sense to qualify for a mortgage instead.


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