The housing purchase analysis model is intended to provide a comparison of the financial implictions of renting a residential pro
The model assumes that the home's price will increase at the rate of general price inflation (the home ownership scenario is as
loss, in real inflation-adjusted dollar terms).
"Scenario 1" describes the case of purchasing a home. Scenario 1 includes up-front costs (downpayment, inspection fees, leg
payments, hydro, gas, etc). Certain of these ongoing costs are assumed to increase over time with price inflation (hydro, gas, r
assumed to be unaffected by the effects of price inflation (mortgage payments). "Scenario 1" also allows the user to include inc
"Scenario 2" describes the case of renting a home. Scenario 2 involves no up-front costs -- only ongoing costs. All "Scenario 2
general price inflation.
In order to use the model, change only the cells in RED (be careful not to change any of the cells in blue).
Given any set of RED input values, the model plots two graph lines.
- the BLUE line estimates the net difference in accumulated equity (including the "paid-off" portion of the mortgage).
- the ORANGE line estimates the net difference in cash flow, ignoring the "paid-off" portion of the mortgage.
In my view, the BLUE line provides the best "acid-test" as to whether purchasing is worthwhile from a financial perspective or n
However, the ORANGE line is also important to consider, because it gives a sense of the actual out-of-pocket cash outlay
required during the period of ownership (this line may have less relative importance to "deep-pocketed" buyers).
plictions of renting a residential property versus the financial implication of buying a
e home ownership scenario is assumed not to result in any capital gain or capital
ownpayment, inspection fees, legal costs, etc.), and ongoing costs (mortage
e with price inflation (hydro, gas, repairs, property insurance). Other costs are
also allows the user to include income from a rental suite (if applicable).
nly ongoing costs. All "Scenario 2" costs are assumed to increase at the rate of
ells in blue).
rtion of the mortgage).
from a financial perspective or not.
ual out-of-pocket cash outlay
House Purchase Analysis Model (v. 1.03)
Change Cells in RED only!
SCENARIO 1: PURCHASE HOME $100,000
NET FINANCIAL POSITION -- OWNERSHIP VERSUS RENTING
Intended Purchase Date Jan-08
Purchase Cost of Home $400,000
Down Payment $40,000
CMHC Insurance $9,000 $50,000
Mortgage Value $369,000
BC Property Purchase Tax $6,000 Excluding the Value of Home Equity
Inspection Fees $337 Including the Value of Home Equity
Legal Fees & Disbursements $750 $0,000
Net Present Value (Adjusted for Inflation)
Property Survey $350
CMHC Application Fee $165
Other Closing Cost (Excl. Adj. For Taxes, Water, etc) $1,602
Mortgage Rate (Semi-Annual) 6.85%
Effective Monthly Compounded Rate 6.75% -$50,000
Amortization (Years) 25
Monthly Rental Income from Suite (if applicable) $500
Annual Property Taxes $2,000 -$100,000
Monthly Hydro and Gas $177
Monthly Property Insurance $100
Monthly Repairs and Maintenance $100
Annual Taxes, Repairs, Heat, etc. $6,524
SCENARIO 2: RENT HOME
Monthly Rent (Including Heat, etc.) $1,200
Expected Long-Term Price Inflation 2.50%
Real Investment Return (i.e., above inflation) 3.50%
Nominal Investment Return 6.09%
Monthly Mortgage Payment $2,550 -$250,000
Breakeven Month Excluding Home Equity none Month and Year
Breakeven Month Including Home Equity Nov-2037
Agent's commission (Assuming 3.22-100/1.15) $6,670