A question people as all the time is Should I rent a home or should I buy.

Heres a break down to make your decision easier.

1. Do you have a down payment?

In Canada, you usually have to have a down payment of at least 5% to buy a house. If you can find someone who is willing to give you a mortgage with nothing down, don’t necessarily jump at the offer. This can be a poor decision due to interest rates compensating for the lack of down payment. If you haven’t been able to save a decent amount of money for a down payment, then this can drastically affect your monthly mortgage payments.

2. How often do you plan to move?

If you move every few years or even more frequently than that, renting may be your best option. Every time you buy a home you have to pay for closing costs, a home inspection, moving costs, maybe an appraisal etc. These costs can quickly add up to thousands of dollars. When it comes time to sell your home you would have to pay marketing costs, etc. Your house will have to go up a lot in value over a few years for you to even break even on this deal let alone make money. While home prices tend to go up over time, they don’t go up every year. In fact, they can go down for a number of years as well. For someone who moves often, buying a house every few years can be a risky investment.

3. What are the benefits of Renting 

• Renting is low risk and low reward. With a single, stable monthly payment. Generally, as a renter you can count on a predictable monthly rent, that may or may not include utilities. Owning a condo involves other monthly carrying costs besides your mortgage payment, like property taxes, condo fees, utilities and insurance.
• Broken fridge? Toilet Leaking? If you're a Tenant usually the Landlord has more responsibility when it comes to maintenance but you can't always rely on the landlord or others to fix your maintenance issues in a timely manner. 
• Freedom to move. If it turns out your new neighbourhood has too much traffic for your liking, provides too long of a commute to work, or you wish you could walk to more of the city’s hotspots, you’re free to move every year if you really want to. If you can’t decide on an area you want to live in long-term, you might be better off biding your time in the rental market.

4. Long-term benefits of home ownership

There are many great reasons to buy one:

• After 25 years, you don’t have to pay “rent” anymore because your mortgage should be paid off. However, if you don’t follow a budget and you spend more than you earn, this will be harder to maintain. Many people refinance their mortgage to consolidate their credit cards and line of credit. If you do this, owning a home may not always get you ahead, it may just prolong the pain of being in debt.
• Once your mortgage is paid in full, you may be able to afford to retire as you will be rent free (meaning you don’t have to make a mortgage payment every month). 
• When you are older and need more care, you can consider the possibility of selling your home to use the proceeds to pay for your medical needs.

5. What does it cost to wait?

You may have a down payment already but may not qualify for the exact maximum price you want in a home. 

Heres a number break down. 

Rent today costs you $1,200/ month. You find a home for $250,000 with an interest rate of 4.65% giving you a comparable mortgage payment of $1,200/month.

You say " ok, I'm going to wait one more year save some more money for my downpayment, pay some debts go on a vacation etc." 

Next year house prices increase and you find a place for $260,000 and interest rates increase to 5.20% now your monthly mortgage payment increase to $1,400/ month.

Over time when you have paid off your mortgage, you have now spent $60,000 Extra just because you waited a year to buy.

Buying a home will most likely be the biggest financial commitment you will make in your life. Finding the right home will take time especially if you're not financially prepared. 

Be sure to reach out to us for a list of mortgage agents we recommend to get you started in your home buying process.

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