When it comes to housing in Toronto, the decision to buy or rent is a big one, especially in the city's downtown core. With prices on the rise, many are questioning whether it's better to buy or rent a one-bedroom condo. In this post, we'll break down the financial differences between the two options and make a case for why buying is the smarter choice.
Let's start with the numbers. According to the Toronto Real Estate Board, the average price of a one-bedroom condo in Toronto was $674,000 in January 2022. Assuming a 20% down payment, that means you'll need to put down $134,800 upfront. On top of that, you'll need to consider closing costs, which typically range from 1.5% to 4% of the purchase price. For our purposes, we'll use a conservative estimate of 2.5%, which brings your total upfront costs to $148,550.
Now let's consider the ongoing costs of homeownership. Assuming a 25-year mortgage with a 2.5% interest rate, your monthly mortgage payments would be around $2,461. Add in property taxes, condo fees, and utilities, and you're looking at a total monthly cost of around $3,100.
On the other hand, if you choose to rent a one-bedroom condo in Toronto, you can expect to pay an average of $2,100 per month, according to Rentals.ca. While this is certainly a lower monthly cost than owning, it's important to consider the long-term financial implications of renting. When you rent, you're essentially paying someone else's mortgage, with nothing to show for it at the end of the day. Plus, you're subject to annual rent increases, which can quickly erode any cost savings.
When you buy a condo, on the other hand, you're building equity with every mortgage payment you make. While the initial upfront costs of buying a condo may be daunting, over the long run, owning a condo is a more financially sound decision than renting.
Another factor to consider is the potential for appreciation. According to the Toronto Real Estate Board, the average condo price in Toronto increased by 13% from January 2021 to January 2022. While past performance is no guarantee of future returns, it's clear that Toronto's real estate market has historically been a good investment. By buying a condo now, you'll be investing in an asset that has the potential to appreciate over time, building even more equity in the process.
In conclusion, while renting may seem like the more affordable option in the short-term, buying a one-bedroom condo in Toronto is a smarter financial decision in the long run. Yes, the upfront costs of buying a condo are significant, but over time, you'll build equity in an asset that has the potential to appreciate. Plus, you'll have the peace of mind that comes with owning your own home. If you're considering buying a one-bedroom condo in Toronto, now is a great time to take the plunge.