Many people think it is better to own a home rather than pay rent, but let’s delve into what is the better choice for you right now.
Everyone has an opinion on whether it is better to rent or buy your own home. So often, opinions are based on personal circumstances and often what is better for one person may not be the best solution for someone else. Since you are the one that must decide for yourself, let’s delve into the age old debate of renting versus buying.
There are definitely some of advantages of continuing to rent:
- Price. Renting can be much cheaper than buying. Maybe you’re paying down a student loan or other debt. Renting, if it’s affordable, might make more sense for you right now and until your circumstances change.
- No commitment. Although many landlords would like you to sign a term lease (6 months, one year, etc) , this can sometimes be negotiable and it may even be possible to start with a month-to-month contract.
- No maintenance. If the furnace quits, call the landlord. If the plumbing backs up, call the landlord. If an outlet stops working, call the landlord. You get the idea. The only repairs you are responsible for are the ones that you or your guests have caused.
- No headaches. It’s easy to move on if you don’t like the place or need something bigger, and you don’t have to worry about selling or finding a new tenant. If the real estate market takes a big dive, you won’t lose any sleep. If the interest rates go sky-high, that’s no concern for you. And you can always look for someplace cheaper to live if you need to. If you own your own home, try asking the bank to reduce your payments, and see how far you get.
But there are disadvantages to renting as well.
- Rental beige. You have no control over your own living space. You can’t renovate or decorate as you’d like, and you always have to ask permission to make changes. If you don’t get the okay from the landlord, you will either have to return your unit to its original condition, or pay to have the landlord do the work.
- Rules rules rules. Most rental units have many, many regulations regarding smoking, pets, noise, and so on. If you were to buy a condo, you would likely have the same regulations, but if you bought your own house, you would have more freedom to live your own life. Have as many pets as you want. Throw a party every night if you want. You get the picture. If you rent, breaking those rules can get you evicted.
- You’re making someone else rich. This one sucks. Your hard-earned money is helping to pay off someone else’s mortgage, when you could be paying down your own. Ouch. Enough said.
- Neighbours. If you live in an apartment, you have to put up with other people’s noises and smells. If you’re used to it, no problem, but I’m not sure there’s anyone out there that likes the smell of your neighbour’s cooked scallops.
So now let’s move onto buying. Here are the advantages of owning your own place.
- Investing in yourself. You won’t be paying the mortgage for anyone except yourself. And if the bank is willing to lend you the money, you can be sure they think you can afford it. That’s their business.
- Equity increase. You can improve your asset. New paint and flooring can increase the value of your house significantly, depending on the condition it was in when you bought it. And if the bank agrees that the value of your house has gone up, you may be able to withdraw some of that equity to purchase something else that is important to you, generally through a line of credit.
- Choices. Statistics show that real estate will always increase in value. Do you know of any houses that are worth less than they were twenty or thirty years ago? Real estate prices always go up and down, but they almost always go up higher than the time before. You don’t have to buy when prices are high, but you can buy what you can afford if you don’t want to wait for another dip in the real estate market. (Side note: I am referring to stick built houses and condos, not necessarily a mobile or modular home which are sometimes called a depreciating asset).
- Freedom. You can do whatever you want. The only people that can stop you are the police, the building inspector, and the health authority! Well, maybe some others too. But you can have as many pets, parties and friends over as you like (unless there’s a global pandemic).
- Pride of Ownership. This is very important to some people. There’s nothing quite like the feeling of living in something that you own. Cutting the grass or shoveling the driveway at a rented house isn’t nearly as satisfying as cutting your own grass and shoveling your own driveway.
- Stability. You can’t get a notice saying that your unit is being sold, or you will have to move out because the landlord wants to do major renovations.
- Long term benefits. When your retirement days start to loom over the horizon and your house is paid off, life can be very good. If you are still making those monthly rent payments, chances are that you will have to pay them for the rest of your life. And rents appear to increase faster than pensions do.
Now, on to the disadvantages to buying a home. And yes, there are some.
- Being locked in. For some people, it doesn’t make sense to buy. If you think that your job will take you to another city every few months, it’s probably not a good idea to buy and sell your house each time you get transferred. Even if you only move once a year, it’s expensive to sell and then buy another home each time. Or maybe you are relocating to a new town to start a new job. Probably best to rent until your probation period has ended and you know the job is permanently yours.
- Maintenance. You are the one that will have to look after all those pesky little issues…toilets, sinks, leaks, mildew, electrical problems, etc. If you have to hire someone every time something goes wrong or if you bought a lemon of a home (asbestos, leaky condo, etc.), it can get expensive.
- Paying the bills. Often rental units come with some utilities that are included such as water, sewer, garbage collection, and sometimes hydro/gas. And it sure is nice to turn up the heat on those chilly days! When you own, these are ALL your bills and if you can’t pay, there are consequences.
- Affordability. It takes cash to buy a house and not everyone is able to come up with even a small 5% down payment. Saving up isn’t easy or even possible for many people. And if your credit rating is poor, chances aren’t great that the bank will be willing to lend you a whole lot.
So there you have it. It’s ultimately your choice. If you are not ready for the responsibility of owning your own home, or if your lifestyle is better suited to renting, then that’s the right decision for you.
If you have other reasons for making the choice to rent or to buy, that’s great. We can’t cover every situation. Just make sure that you have a plan for yourself. You are the only one responsible for your financial future.