For many people, the ultimate dream is to own their own home. It comes with great benefits like building equity by owning an asset that will often appreciate over a given time. That being said, many people prefer the low commitment of rental properties and the increased financial freedom it affords them.
What do you need to know about renting versus buying a home in Canada?
Before you call the mortgage company about whether you can afford the purchase price of a new-to-you home, here are some things to consider:
First and foremost, it’s important to look at some of the hidden costs of home ownership. If you can only afford to buy an old home, it might make more sense to rent. Older homes that haven’t been updated in years (or decades) may have a lot more maintenance costs to them. For example, old appliances can break, and roofs might need to be repaired. Maintenance costs can add up quickly when you own your own home.
On the other hand, if the hot water heater dies, for example, the landlord or property management company will typically cover the replacement cost as part of the wear and tear on the home.
Price Stability With a Mortgage Payment
If you’ve been renting a home for a while, you might have come across this scenario: You’re finally in a place where you’re happy with where you live and what it costs. Your lease is just about up when you receive a letter in the mail: Rent is going up if you sign another year-long lease.
The good news is that if you buy a home with a fixed-rate mortgage, your mortgage payments will be the same month after month until the end of your loan. You’ll always know just how much to budget, regardless of how housing prices in your area are affected by the economy.
Sizable Initial Investment
A landlord might require a security deposit as well as the first and last month’s rent. This can set you back thousands of dollars, depending on the price of your rent. However, the costs to buy a home are exponentially more. You’ll need to cover both the down payment and closing costs among other things like land transfer taxes.
On a conventional mortgage, your down payment could be as much as 20 percent of the price of the home. Factor in a few thousand more for legal fees, the land transfer tax, and property taxes, and you need a pretty penny to make it to the closing table.
More Flexibility With Rentals
Are you unsure where you want to put down roots? It’s much easier to change locations every year if you rent. The standard lease is good for 12 months, giving you time to feel out a location before you decide whether you like it or not. If you decide that this city isn’t for you, then you can just skip signing another year-long lease.
Buying a home is a lot more permanent and difficult to get out of in a hurry. You’ll have to cover the selling costs and continue making monthly payments until the property officially sells, which can leave you strapped financially. Mortgages don’t allow you to just up and move like renting does.
More Autonomy With Home Ownership
While property prices are certainly on the rise, there’s one thing that it’s hard to put a price tag on when it comes to your living arrangements: Autonomy. Rentals are subject to the rules that your landlord puts in place. They may limit how many pets you can have and even what kind of pets they are. You might not be allowed to paint or redecorate.
When you make the monthly mortgage payment on your own house, you earn the freedom to do whatever you want with that property. Roll out a fresh coat of paint, install some custom bookshelves, or whatever your heart desires—as long as you think of it through the lens of being able to build equity!
Building Equity With Your Own Home
Last but not least, it’s important to think about what the housing costs really represent. You’re making a monthly payment to your mortgage company and that goes toward the principal investment in your home. Instead of paying someone else’s mortgage, you cover the cost of your own.
Every penny that you pay goes directly toward your mortgage, not someone else’s. You’ll be able to sell the house when you choose to and recoup some of the costs that you’ve already sunk into it. Investing in real estate and owning a home is a great way to make good use of your money.
Given that real estate tends to increase in value over time, you’ll have more equity when you sell your home, whereas renting leaves you with nothing to show for your hard-earned dollars.
Is Renting or Buying Right for You?
There are definite benefits to both buying and renting, especially in hot housing markets like the one we’re currently in. Owning a home is a great investment if you can afford it. Renting can add more flexibility and freedom to your life.
If you think that renting is for you, let Premier Property Solutions help you find Winnipeg rental properties that will best suit your needs; we’re experts at finding the right place for you to call home.