Pierre is deciding whether he should rent or buy a house. Assuming that renting an apartment will cost of him $1,500 per month and the mortgage on a house is $3,500 per month.

If he rents, he considers investing the difference between monthly rental cost and mortgage cost in a Balanced Fund earning 8% per year. If the house he purchases in Oshawa, Ontario costs about $800,000 and he intends on paying off the mortgage after 25 years.

If he decides to sell the house in 25 years and the house appreciates at a rate of 4% per year:

• Question 1
  • What would be the better outcome, renting or buying, and by how much? (Show your work and include all financial calculators)
  • Calculate the investment value of renting versus homeownership.
• Question 2
  • Based on your answer to Question 1, what factors would make you change your mind and choose the other?
  • List a minimum of 3 reasons or factors and elaborate as to why.

Answer rating: 100% (QA)

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