An interest rate of 6.99% (7.324% APR) is for the cost of 2.125 point(s) ($5,843.75) paid at closing. On a $275,000 mortgage, you would make monthly payments of $1,827.74. Monthly payment does not include taxes and insurance premiums. The actual payment amount will be greater. Payment assumes a loan-to-value (LTV) of 80.00%.
The equity you have in your home is equal to its projected value at any given year minus the loan balance. For example, if you put 20% down on a $250,000 purchase with a 30-year fixed-rate loan at 6.5%, and assuming a 3.18% annual appreciation rate on the home’s value, your equity after 5 years would be approximately $107,878.
The total cost and Year 1 cost include one-time expenses associated with getting a mortgage. These include, but aren’t limited to, your down payment and closings costs. For renting, the one-time expense includes a security deposit. These one-time expenses are not reflected in the monthly cost or any yearly cost after the first year.
Property Taxes
$4,340
Closing Costs
$15,094
Private Mortgage Insurance
$0
Homeowners Insurance
$1,200
Homeowners Association Dues
$1,200
Home Maintenance
$3,774
We apply typical one-time costs and ongoing expenses that come with owning a home. Additionally, we make several assumptions about these costs and other factors that apply to homeownership.
Down payment: Depending on the type of loan, you’ll need to make a down payment of at least 3 to 3.5% of the purchase price. This is an upfront payment due at closing that you must pay out of pocket. While you can make a lower down payment, it’s recommended that you put down at least 20% to avoid paying private mortgage insurance (PMI). It may also lower your monthly bill because you’ll be borrowing less. You may also get a better rate.
Closing costs: These are fees charged to process and close your loan application. Examples of mortgage closing costs include title fees, recording fees, appraisal fees, credit report fees, pest inspection fees, attorney’s fees, taxes and surveying fees.
Monthly mortgage payment: Your monthly mortgage payment includes principal, interest, property tax and homeowners insurance. Mortgage insurance is applied if the down payment is below 20%. Conventional mortgages use private mortgage insurance (PMI). As part of the loan guidelines set out by Freddie Mac, Fannie Mae and most investors in conventional loans, a borrower is required to pay PMI when at least 20% of a home’s purchase price is not provided as a down payment.
With an FHA loan, if you make a down payment of less than 10%, you’ll have to pay for mortgage insurance for the life of the loan. This is referred to as a mortgage insurance premium, or MIP. With down payments of 10% or more, you make MIP payments for 11 years. However, once you have 20% equity in the home, you can refinance to a conventional loan, where you won’t pay mortgage insurance.
Here’s everything assume when calculating the cost of buying a home:
Here’s an example of how these costs and assumptions factor into the cost of owning a home:
Scenario:
Purchase Price: $250,000
Interest Rate: 6.5%
One-time Costs:
Down Payment: $50,000 (20% of purchase price)
Closing Costs: $10,000 (4% of loan amount)
Annual Costs:
Property taxes: $2,875 (1.15% of purchase price)
Homeowners insurance: $1,200 (fixed amount)
Homeowners association fees: $1,200 (fixed amount)
Home maintenance: $2,500 (1% of purchase price)
The total amount of all one-time and annual costs is $79,233.
Next, subtract the net revenue from the mortgage balance. Based on our assumptions, if the home is sold after 1 year at a value of $257,950, then the estimated net revenue on the sale will be $239,991. The mortgage balance after 1 year is $200,949.
$239,991 – $200,949 = $39,042
Finally, subtract this amount from the total amount of one-time and annual costs:
$79,233 – $39,042 = $40,191
In this scenario, the estimated cost of owning a home after the first year is $40,191.
Please remember that we don’t have all your information. Therefore, the rate and payment results you see from this calculator may not reflect your actual situation. Simply Approved Mortgage offers a wide variety of loan options.
Calculating this cost isn’t as complicated. The only one-time cost you pay is a security deposit, which is typically equal to one month’s rent. Ongoing expenses for renting include your monthly rent payment and may include a yearly renters insurance premium.
Other factors that affect the cost of renting may include, but are not limited to, general inflation, home appreciation, rent appreciation and renters insurance. We assume a yearly renters insurance cost of $197 per year, which was the national average in 2019.
Here’s an example of how these costs and assumptions factor into the cost of renting a home:
Scenario:
Rent: $1,000 per month
One-time Costs:
Security Deposit: $1,000 (Equal to one month’s rent)
Assumed Costs:
Renters insurance: $197 per year
Multiply the monthly rent by 12 to get the annual rent. In the scenario above, this equals $12,000.
Next, add the security deposit and renters insurance to the annual rent. In total, the estimated cost of renting after the first year is $13,197.
Keep in mind: the security deposit only applies to the first year’s cost of renting because it is a one-time cost.
In today’s fluctuating economy, Canadian homeowners are increasingly looking at refinancing their mortgages
In today’s unpredictable financial landscape, many Canadian homeowners find themselves facing the challenge of securing loans
For Canadian homeowners, leveraging the equity built up in their homes can be a powerful financial tool.
Simply Approved Mortgages is committed to providing top-notch mortgage solutions and exceptional customer service. Learn more about our services and team.
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