Answering that burning question: to rent or buy?
To rent or buy a home, that is the question. There's sound reasons for both and equally rational ones against each. Personal circumstances dictate the right move. Here are a few pros and cons to consider for both scenarios:
- Without upkeep and property taxes to pay, it frees up more cash so that you can sock some away for a down payment on a home or build a retirement nest egg. Putting down the minimum five per cent for the average home, nationally, means having at least $18,600, plus another $5,000 to $6,000 for closing costs, ready to plop down.
- Renting gives you time to find the right place you want to call home without pressure of timelines or conditional sales.
- More mobility. You can move with no strings attached.
- You own nothing, have no assets or equity to stake a claim on when you are ready to move and depending on how long you've been renting you may be pouring out more cash than you would have, had you paid it toward a mortgage. Seven years seems to be the threshold, according to most rent vs. buy calculators.
- There's no guarantee your rent won't go up over the years.
- Homes appreciate in value, typically, ensuring you will have a return on your investment so long as you don't move for awhile. The mortgage payments you make build your equity over time.
- You can alter the home's interior and exterior as you like.
- Less disposable cash. The Royal Bank of Canada's economists took a look at affordability recently and found that the costs of owning a two-storey house (mortgage, property taxes and utilities) consumed 55.6 per cent in Toronto and 40.9 per cent in Ottawa, for example.
- Budget gurus all advise that housing expenses should never exceed one-third of your monthly income. And as alarming as those numbers already are, when interest rise such costs will soak up even more of our income.
- There's no guarantee your investment is safe or will generate the returns other investment vehicles would.
- There is a certain satisfaction in owning your own home, but only if it's important to you and it makes financial sense for you lifestyle and expectations. It's a big decision and it shouldn't be made hastily.