Renting vs Purchasing

Renting versus buying is a common decision that many people face. It is a common belief that renting a unit is substantially cheaper than actually owning one and this is not always the case. In most circumstances, owning a home can actually result in great long terms savings, and also has the pride of home ownership associated. 

A common statement from many renters is that they are currently saving more towards their down payment and that is why they have not yet taken the steps to home ownership. While waiting to have substantial savings before investing in real estate is a sound and logical idea, it may prevent you from entering into the market completely. Understandably, with a larger down payment you will be able to have a smaller mortgage to pay off resulting in smaller monthly payments, but during this period of waiting, home prices have continued to rise, thus requiring you to have a larger downpayment for a smaller home. 

Furthermore, there is a wide price range of buying options available in today’s market. From condos, detached, semi-detached homes and townhomes, there is certainly something for everyone’s budget. There are options for new, resale, and pre construction condos and homes. You are able to get into the real estate market and purchase something smaller like a condo to begin with and then later upgrade to something larger when required. Once you are in the real estate market and have obtained a mortgage, your equity increases every mortgage payment, instead of creating equity for your landlord. This equity can then go towards the down payment for your next home. Right now there are down payment options as low as 5% initially down.

Most importantly when buying any home, you are building equity. You do not need to wait until the life of the mortgage to reap the benefits of equity. If you have built up enough, you can refinance your home and take out the earned equity from your house or condo for other uses- kind of like your own bank- and where are you going to find a borrowing fee as low as the mortgage rates? Your credit card is charging you upwards of 19% interest, while we are seeing mortgage rates hovering at 2.5%! It is a no brainer! This equity is also not taking into account the market value increase that will most likely affect your home if you hold it long enough. Canada has one of the most stable economies in the world, and many foreign investors choose to invest in real estate here because of the historical stability of the market with a steady increase in value. 

With renting you are likely to have monthly expenses that are not far off than the ones associated with ownership. Although 5,10 or 25 years later, you will not have any equity from the payments made.

In a market like this, home prices are more than likely rising faster than you can save, and so our advice is to purchase NOW, whatever you can afford. It is a better plan to purchase a few times between now and your dream home, rather than save for your dream home to purchase first. 

If you are still uncertain about whether or not now is the right time to stop renting and begin to look at purchasing a home, talk to your real estate agent. A realtor is an expert in the buying and selling market. We can assess your situation and advise you about what is on the market that could be a good fit for you and your lifestyle.

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