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On a $500k house in Toronto

To buy
$15k Mortgage default insurance
$6k land transfer tax
$6k municipal land transfer tax
$2k sales tax on mortgage default
$1k legal fees
$500 title insurance
$500 home inspection fee
$300 appraisal fee
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Total: $35k

Monthly expenses
$2300 fixed rate for 5 years at 3%  (mortgage rate might go higher for future years - consider refinancing)
$500 for 1.25% of home for repairs annually
$300 property tax at 0.7%
$80 property insurance
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Total: $3200



To rent
$2100 monthly rent
$20 renter's insurance
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Total: $2200

if renter commits the difference of 3200 - 2200 into saving asset he has to save 1000 per month -> investment portfolio

3.5% long term growth rate for housing
in general portfolio grows at 7%
inflation 2%

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after 25 years
The buyer
sells for $1.2M
$64k in fees
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Total $1.1M
adjusted for inflation his networth is $681k
5% realty commision

The renter
$1M in stock
capital gain tax $77k
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total $950k
adjusted for inflation his net worth is $578k


None of this really applies to the U.S. If the Mortgage+taxes on a home is $3,200 you can damn well know that no one will rent the same one next door for $2,000, unless of course, they are entirely stupid and devoid of any business sense. More likely a similar $500k home next door will rent for $5,000 per month with a 1 or 2 year fixed lease. They may also require first and last month upfront plus a deposit. You want to protect that $500k investment when you rent it out. Now, again in the U.S., none of this applies. First off, it is unlikely that you could qualify for a $500k home with just $35k assets, assuming that means cash at the bank. FHA/HUD might let you get in with a 5% downpayment, but realistically you are going to buy a home under $250k, or a condo. Now, again, in the U.S. all that mortgage interest and property taxes are deductible from your income taxes. If your loan payment is $3,200 per month you can count on the first 15 years of that loan paying nearly ALL of that to interest, so you might be paying $3,100 in interest plu another 3% of the price of the home as property taxes or $37,200 (interest) plus $15,000 (property taxes) for a tax deduction of $52,200 each year!! While Roger gets ZERO deductions. That's EVERY year deductions!!! What a homeowner needs to understand is how to leverage the investment. Infrequently does anyone buy a home to live in it 30 years and pay it off. It's just a way to offset taxes, potentially profit in an increasing market. Just like the stock market when prices go up you need to sell, or refinance and cash out. In the U.S. you can no longer deduct from taxes your credit card interest rates or student loan debts. Imagine buying a home for $200k, and in 8 years it goes to $350k. You could payoff ALL credit card and student loan debt, and with the 30 year loan it would only be slightly more per month, but without all the debt, so it offsets AND you can deduct MORE from taxes. At the end of the year you actually come ahead. While Roger the renter is stuck in a crap hole paying someone else money, never accumulating anything.














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