My friend bought a two-bedroom condo last for $400000 including GST. Now the same
units can be bought around $350000 in the same area. Let me show you how much the
$50000 will cost him over the mortgage term.
Just assume the average mortgage rate in the next 35 years is 5.5% (below the average
rate for the past 35 years) and the mortgage is $300000 and if someone buys now the
mortgage is $250000. For the purpose of comparison, assume the person who buys now
with $250,000 mortgage pays the same monthly payment with the $350000 mortgage.
Mortgage amount 300,000 250,000
Interest rate 5.5% 5.5%
Monthly payment 1598.89 1598.89
Amortization 35 years 22 years 9 months
Total payments 671,527.93 435,999.33
More money paid 235,528.60
So my friend paid $50000 more than the current price. By owning his home one year
earlier, he has pay $235,528.60 over the next 35 years.
If the calculation is based on 25 year amortization, the total extra cost will be $158,882.02.
If some one tells you it doesn\'t matter when to buy if you buy your principal home, tell him
or her to shut up.
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