Is it better to Rent or Buy?

Friday Oct 21st, 2016

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Rent vs Buy

Every day we make decisions about purchasing various items, it could be lunch, coffee, a book, a pair of shoes and every now and them an automobile. On some items you have the option to return the merchandise if you are not happy with what you purchased, the item may be returned within a certain period and you get your money back, but purchasing a home is a very different story. This option is not available when you purchase a property. Therefore, it is important that you do your homework and be knowledgeable about the current market condition, the property, and the process.

 

Buying a home:

Owning a home does offer a secure and permanent place for you and your family. It is common knowledge and based on historical information, real estate investment has performed by far better than any other investment market such as stocks, bonds, and mutual funds. Further statistical data proves that the value of residential properties has always appreciated year over year, with very few and short lapses in the past few decades. You can deduct Property taxes and mortgage interest, on your income tax return. If the mortgage terms are fixed the monthly payment will remain the same, while the Landlord will increase the rent year over year, although the rent increase in Ontario is controlled under the residential tenancy act, the guidelines for rent increase are usually aligned with CPI (Consumer Price Index).

 

When owning a home you make the decisions about decorating and if you are a repair person, you may save on the labor costs and perform most of the tasks yourself, keep in mind when you own a home- you are responsible for the maintenance costs. Other costs to take into consideration are purchasing costs, land transfer taxes (in the city of Toronto there are two; the Provincial and Municipal Land transfer taxes), annual costs (mortgage payments, insurance, property taxes, and selling costs, and lost opportunity costs.

 

Renting a property:

 

When you rent or lease, regardless of the duration, at the end of the lease term, you have nothing of permanent value to gain for the years of monthly payments. Due to this prime factor, it is obvious that owning a home rather than renting is an obvious choice. In addition purchasing, a home has unparalleled advantages of building equity. There are, however, some advantages of renting, for example renting offers a higher degree of mobility, and since you are not financially tied to the property, it is much easier to relocate. Another advantage is that usually, Landlord is responsible for maintenance costs. For renting consider the following costs: Initial cost (first and last) and security deposit, monthly rent payment, tenant insurance, rate increases in the area and , the cost of moving and of course lost opportunity cost

Another important factor to consider is how long you are planning to stay in one area if you are not planning to move anytime soon, it is advisable to purchase rather than renting.

The fundamental difference is that purchasing a home is an investment and requires careful and meticulous planning, in order to avoid financial and emotional disaster. For more information click here

 

Here are a few points to keep in mind while in the process of evaluating renting vs. purchasing:

  • The price range of the type of property you are purchasing
  • Your down payment
  • Your total debt
  • Your annual income 

 

In today’s digital world, it is possible to determine exactly the price range of a residential property you can afford and therefore make an informed decision - whether continue to rent or take the hurdle and own your own home. There are many buying vs. renting calculators available on line to help you with the comparison study. For more information, click here

Remember you do not have to live in a place in order to own it. You can always buy an investment property, with borrowed money from the bank and build equity.

When you have all the information, you can do a comparison study in the area and then decide. The prudent thing to do is to talk to professionals such as real estate agents or a home- buying specialist, many of whom offer their services free of charge. Of course, you may call me anytime at 416-428-8311. It will be my pleasure to answer any questions you may have.