Q: What are the advantages of buying vs renting? With renting you don’t have to worry about repairs, property taxes, maintenance fees, or a downpayment. With all these costs, is it worth it to buy?
– Peterson J.
A: Hi Peterson,
Thanks for the question. Since you’ve given me the benefits of renting (and they are plentiful), I’ll play devil’s advocate and give you the other side of the coin and explain some of the benefits of buying vs renting.
NO RENT INCREASES
Any house/building that was built after November 1991 isn’t subject to rent control increases. This means that if you’re paying $1800 per month for your 2014 built condo, the landlord can attempt to increase that rent by any amount the following year. If you can’t agree on a price they’re open to renting it out again to another person.
With a fixed-rate mortgage (which most homeowners use), your payments of principal and interest remain the same. You no longer have to worry about rising rents on a year-to-year basis. Of course, you must renew your fixed-rate mortgage after a set amount of time, but those time periods usually last at least 5 years. And with interest rates at historic lows, many people are jumping in now to reap the benefits.
EQUITY FOR THE FUTURE
Once you pay your rent that money is gone and will never be seen again. In fact, you will be building other people’s equity. But, with each mortgage payment you are making an investment and building equity in your home. This almost forced-savings approach will allow you to have a ready-made downpayment for a larger house in the future or can reduce your mortgage significantly if you decide to downsize instead.
SECURITY FOR RETIREMENT
Eventually (if you plan it right) your mortgage will be paid, leaving you rent-free for your retirement. Again, building equity for the future through your assets is going to be of utmost importance as we head towards an uncertain future for social assistance for retirees. People will be working longer and experiencing more gaps in employment as the job economy landscape continues to change.
PAY BACK ON IMPROVEMENTS
As a homeowner, you can obtain some or even all of the costs of the improvements you made when you sell your home. On top of that, there are far, far less restrictions than what a renter faces. You can paint the wall any colour, add any fixtures or appliances, and make any improvements or renovations that you want.
LIFESTYLE & COMMUNITY
You will find that your neighbours are very much like you – they are willing to invest time, money, and effort into the care of their property, which ultimately improves the value of your own.
Some lifestyles lend themselves better to renting than they do owning a home. If you’re young and flexible and have aspirations of moving across the country or to an entirely different one, then renting is probably a better option. However, if you’ve got a stable job, are planning a family, or are looking to build wealth, then homeownership makes a lot of sense.
In the end, buying vs renting is mainly a lifestyle decision. You need to decide how much control you want over your living situation and the type of lifestyle that you prefer.
[Photo credit: Home Water Softener Reviews]