Choosing to buy or rent is a major life decision and financial decision that affects your life goals and your financial wealth. The rent vs buy debate is an ongoing one, but there isn’t one answer that’s right for everyone. If you’re deciding between renting vs buying, you may want to speak with a financial advisor and take a look at the benefits and drawbacks of both options.
Should You Rent a Home?
There are many advantages that come with renting a home. It’s a common misconception that renting means throwing money away when this isn’t always the case. These are the advantages of renting a home or apartment.
Minimal Maintenance
Whenever you experience maintenance issues like a leak, you call your landlord. The landlord is responsible for maintaining the house which makes it cost efficient and much less stressful.
Less Expensive
Rental costs are often less expensive than owning a home, even when the mortgage is less than the total cost of rent. You don’t have to worry about the purchase price or mortgage rates of a home. For many, this is the affordable option that makes more sense.
Renters typically don’t pay:
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Property taxes
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Maintenance costs
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Utlities
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Condo fees
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Homeowners insurance
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Home insurance
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Renovation costs
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CMHC insurance
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Loan interest rate
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Closing costs
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Other monthly costs and tax
Easy Monthly Payment
When renting, you have a predictable monthly payment of your rent, and your utility bills after paying a security deposit and renter’s insurance. You know exactly how much you’ll be paying for your monthly rent and the total costs. You don’t have to worry about any other costs like mortgage insurance or fees. When you own a home, you have your mortgage payments, homeowner’s insurance property tax and other fees.
Less Commitment
Renters, can easily decide to move if they want to live somewhere else.. As a homeowner, this is much more difficult and takes more effort to do. As a renter you can move out and sign a new lease agreement at your new home. A homeowner will have to sell their home and take care of all of the legal and selling fees as well.
Cheaper To Move
If you rent and decide you want to move somewhere else, it’s much cheaper to do so than it would be as a homeowner. As a renter, you can decide to move somewhere else and sign a new lease agreement. As a homeowner, you need to list your house on the market and pay the fees to sell it including selling and legal expenses.
The Advantages of Owning a Home
Purchasing a home is a big milestone that many dream of experiencing in their lives. Although getting into the property market is a big life decision, there are many positives that come with owning a home.
You’re Contributing To Your Mortgage Payment
As a homeowner, your monthly payments go into your mortgage, rather than someone elses with rental payments. Although a part of your mortgage cost is interest paid to the bank, part of every payment goes towards building equity in the future as your principal residence. If you secure a good mortgage rate, a good home price and buy when the stock market is doing well, home ownership is a good investment.
You Benefit From Property Prices Rising
When housing prices go up, you get to reap the rewards as the price of your home raises and increases your property value and capital gains. Many renters will not have rent control and as prices rise and rent increases, housing affordability will decline. This works for the other side as well – if prices decrease and go down, your home value and home equity decreases you may lose money.
More Freedom
You can choose whether you want to renovate, paint the walls, and change anything about your own home. You don’t have to ask the landlord for permission to paint the walls and have complete creative freedom over your home.
Who Should Rent?
There are many reasons why some people should continue to rent rather than buy a home. Here are a few reasons you may consider renting:
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You don’t have enough for a down payment
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You travel and aren’t sure where you’ll be in 5 years
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You don’t want any risk
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You like predictable, recurring costs
Who Should Buy?
Buying a home has its benefits, and you may feel ready to take the leap and become homeowners. Here are reasons why you could be ready to enter the housing market:
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You can afford to buy a property
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You don’t want to pay someone else’s mortgage
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You’re looking to use real estate as a way to invest
Renting and buying both have their set of positives and drawbacks. There is no right choice when making such financial decisions for everyone but each person has their own individual path to rent or buy their home.
