Renting vs. owning a home, which is better? That’s one of the common questions that most people ask, and it has resulted in heated debates among home buyers. Generally, what works best for you depends on your prevailing circumstances and financial situation.
Whether you rent or buy a home, you should know that both have unique advantages and can significantly influence your lifestyle and savings over time. Besides, they both have a few drawbacks, necessitating the need to understand the complexities involved in both.
In this guide, we look at the differences between renting vs. owning a home and the things you should consider to help you make an informed decision. You will also get to learn the benefits of renting vs. owning a home and their drawbacks.
Factors to Consider before Renting or Buying a Home
As you contemplate on whether you should rent or buy a home in Canada, you need to consider the following factors:
- Duration of Occupancy: If you move more frequently from one region to another, it’s no doubt that renting will be your best choice. Buying and selling your home every time you move can be costly in the long run.
- Down Payment: When buying a home in Canada, you must have a down payment of at least five percent of the total cost. So, you need to find out if you have enough money for the down payment. If not, you can opt for renting rather than owning a home.
- Affordability: Ask yourself if you can afford to pay house mortgages every month. If you can afford the monthly mortgage payments without fail, you can buy a home. However, if you can’t provide that, renting will be a better alternative.
Renting vs. Owning Pros and Cons
As mentioned, both renting and buying a new home have advantages and disadvantages. Here are some of the pros and cons of each option.
Renting a Home: Pros
It’s no secret that many people in Canada are renting, not only to save on the costs of buying a new house but also to take full advantage of the rentals’ flexibility. Here are some of the other reasons why other people rent homes.
- Highly Flexible: Renting a home makes it easy to move from one place to another without incurring additional costs. If you feel you might move to another country or city soon, renting will be the most convenient option.
- Less Costly: With renting, you don’t need to pay for the down payment. All you need to pay in advance is the rent for the first and last month, and that’s cheaper than a down payment for buying a new home.
According to the National Bank of Canada, renting a home has become cheaper than owning a home on a national level. Factors that have attributed to that are the rapid growth of house prices and a steady increase in mortgage rates.
- Highly Predictable: You can predict the amount of money you’ll spend on housing expenses each month. That will help you prepare an effective and reliable budget for each month.
- No Maintenance Costs: Once you pay rent, you don’t need to worry about repair and maintenance costs. It’s the landlord who will handle the repairs at their expense.
Renting a Home: Cons
While renting a home is less costly and highly predictable, it also has a few drawbacks, which include:
- Rental Increases: When you rent an apartment, you may face an unpredictable increase in rental prices in the future, and that can be costly in the long run. However, that’s not the case if you live in a city that offers rent control, like Toronto.
- Not Customizable: When you live in a rental house, you cannot personalize it to fulfill your special needs and interests. If you must, you have to seek consent from the landlord.
Owning a Home: Pros
It’s no secret that everyone dreams of owning a home due to its endless benefits. If you are one such person, you can check out the new homes in Ballantrae. Here are some of the advantages of owning a home.
- Pride of Ownership: Owning a home brings a feeling of satisfaction because you have full control of the house. It creates a sense of belonging to a particular community.
- Builds Home Equity: A home is an illiquid asset that you can sell when the house prices are high. You can also take out a loan using your accumulated home equity.
- Increases in Value: It’s no secret that the value of homes increases in value as years pass by, increasing your home equity.
- Customizable: When building or buying a new home, you can customize it to fulfill your interests. You are free to choose what to add to your home.
Owning a Home: Cons
Here are some of the drawbacks of purchasing a new home.
- Relatively Expensive: Owning a home is costly. When buying a home using a mortgage, you must first pay a down payment and closing costs. Some other expenses that you may incur as a homeowner are property taxes, repairs and maintenance, homeowners insurance, pest control, and sewer services.
- Reduced Flexibility: Relocating from one city or country to another can be quite tricky when you own a home. You may have to sacrifice a lucrative job in another town far away from your home.
Renting or owning a home depends on your personal needs. Most importantly, you need to evaluate your financial situation because it will influence your decision significantly. If you can afford to pay off your mortgages on time, proceed to buy a home. But if you can’t afford the expenses associated with owning a home, renting can be more convenient.