Rent Or Buy

Is It Better To Rent Or Buy Today?

Let me take a wild guess here; you’ve wrestled with this question for quite some time now.

Should you buy or rent your next home?

Here’s the thing, both home renting and buying have their share of advantages and risks. But, to find out which is the best option for you, here are five questions to ask yourself.

  1. Are you stable personally and professionally? Are you sure where you’ll be within the near future?
  2. Do you have a down payment? This payment is usually between 5-20%+ of the total purchase price of the property and – as they are legally required in Canada – it is a critical part of this equation.
  3. Do you save enough? Can you afford the place or neighborhood you would like to live in?
  4. Have you considered the costs involved when buying and maintaining a home? Do you prefer the option with less risk?
  5. What are your needs and aspirations?

Before going any further, let me tell you a secret: there’s no definitive answer to put this debate to rest once and for all.

We all have to compare the option of renting vs acquiring a property. So you need to look at the pros and cons of each.

In this article, we’ll break down the advantages and disadvantages of both scenarios for you.

Pros And Cons

The Advantages Of Renting vs Buying A Home

Whichever option you choose today, you’ll be robbing yourself of the advantages of the second-best option. Even so, here’s why you should rent or buy a home.

Renting A Home – Advantages

1. Enjoy stable monthly payments

By renting a home, you’re able to count on a predictable monthly rent, which might include utilities if you’re lucky.

With the jaw-dropping high-cost of real estate in the big cities, you should expect to carry more than your monthly mortgage payments, property taxes, utilities, and insurance.

2. Freedom to move

If it turns out that you don’t like your new neighborhood, you’re free to move every year.

Hence, if you can’t decide on an area to live long-term, then you’re better off placing your bet on the rental market.

3. No maintenance

This option is the best for commitment-shy people. For starters, renting a home requires less maintenance hassle.

You’re essentially off the hook for maintenance tasks and expenses. As a tenant, all these are the responsibilities of your landlord.

4. Sometimes it’s cheaper to rent

Look at the difference in monthly payments for the kind of property you’d like to buy vs rent. And this can be especially true if you don’t have a significant down payment; it makes a good option as you save up to purchase in the future.

Buying A Home – Advantages

1. Most of monthly payment goes to your mortgage

Instead of helping your landlord reap the rewards of home ownership, your mortgage payments can go towards equity, which will benefit you in the long run.

It’s a form of forced saving.

2. Solid investment

Property acquisition is a solid investment plan. Above all, real estate investment has always been a popular investment vehicle for those who seek good yields and predictable returns.

And – unlike other forms of investment – it’s an tangible asset. Put another way: you’re always going to need a place to live and you can’t live in a stock contract!

As such, you can consider paying off a mortgage as a kind of savings plan, with some risks, of course. If you save money by renting only to blow those funds away, you’re better off buying as a long-term financial plan.

4. Sometimes it’s cheaper to buy

We all know that the rental market is competitive, especially in neighbourhoods such as downtown Toronto.

Buying could actually be more affordable than renting in prominent neighborhoods. In areas such as Yorkville, renting can cost you an arm or a leg.

5. The pride of home-ownership

You can’t put a price to the satisfaction that comes with home-ownership.

The freedom and luxury of owning your own space, to have as many friends over, renovate your home, paint walls and more.

You can still abide by condo rules, but in the end, it’s your home, so you call the shots.

Disadvantages

The Disadvantages Of Renting vs Buying A Home

Renting A Home – Disadvantages

1. It takes longer to get issues resolved

When renting, you may find yourself dealing with a rental agent, who acts as a liaison between you and your landlord.

As such, it will take time before issues get resolved.

2. You might end up stuck in your place

A lot of people in Toronto right now can’t afford to move to a new place because the costs of a new place are so much higher than what they’re currently paying because of rent controls.

Essentially, they are lucky in that they’ve found themselves in a place with lower than market rent – and they’re kind of ‘stuck’ there in that leaving will lead to them paying much more.

So one of the key advantages we talked about above – the flexibility of being able to move where and whenever you want – doesn’t exist in certain kinds of renting conditions.

3. No real wealth creation or return

Since the property will never belong to you, and you’ll only be paying the homeowners mortgage, there’s no wealth creation or investment.

As the old adage goes, you’re paying someone else’s mortgage for them.

4. You could get kicked out

As a tenant, you are at the mercy of your landlord – to a certain extent.

While controls and protections exist in Toronto and Ontario, if the landlord decides to move back into the property at any time, there is almost nothing to stop them…

5. The rules bind you in the lease agreement

As a tenant, you are bound by the terms and conditions stated in your lease agreement, which impact the freedom you have.

You cannot make any changes without the landlord’s consent.

This could include pet restrictions and a wide range of other things.

Buying A Home – Disadvantages

1. Financial responsibility

Being a homeowner carries a substantial economic burden, which also includes mortgage repayments and house maintenance.

You have to make sure you can make mortgage payments every month – as well as cover the other costs of owning a home. Speaking of which…

2. Additional costs

There are other costs involved in home-ownership – such as taxes, maintenance, and insurance. As a homeowner, you must incur the additional charges that come with home-ownership.

Not paying these could result in your losing your home.

3. The risk of making a loss through resale

Many homeowners who wish to sell their homes run the risk of not making any profit on the resale.

These losses might be caused by economic factors such as a recession, a rise in interest rates or a fall in house prices.

4. There’s less mobility

A homeowner can have just as hard a time moving than a tenant who rents for the short-term.

A tenant can decide to leave the property only if they fulfill the notice period, which is usually one to two months.

But a homeowner is dependent on selling the property to be able to buy a new one – or coming up with another solution.

Conclusion

Renting or buying really depends on your individual view of the world, financial situations and preferences.

There are some people who would read this article and immediately feel buying clearly wins; others might read it and feel that renting makes sense.

There are many factors to consider, as well as multiple variables affecting this equation, namely: individual circumstances and taste preferences, housing market conditions in the next five years, costs of renovation in the next ten years and more.

If you feel that buying is a good option for you, we can help. We have many Realtors in the Greater Toronto Area – as well as the surrounding areas – who are the best in the business – and can help you save tens of thousands of dollars buying a home. Click here to learn more about how we can help you.