Renting vs Buying

Renting vs buying a property – this is one of those questions that is being asked by Canadians in every generation. However, the answer to this question is dependent on a variety of factors that must be considered before arriving at a final decision. Most Canadians would have heard that renting a property is considered as dead money and there is no benefit in renting a property, but this is not always the case.

Although several factors need to be considered when renting or buying a property, the major factor to be contemplated is the financial factor. There are several situations where a person would consider renting a property to be beneficial especially since purchasing a property requires a greater capital investment. Although, it is imperative to highlight that home ownership is a top priority for many Canadians. Furthermore, purchasing a home is perceived as a milestone which leads to improvements in quality of life.

Several analysts have suggested that it is financially benefit for a person to purchase a house in Canada if they have ample funds for a down payments. Karen Yolevski, chief operating officer of the Royal LePage Real Estate Services Ltd. said, “Canadians strongly value home ownership for many reasons. Not only is it a great source of pride, but it is also likely the largest and most significant financial investment most people will ever make”.

There are several advantages to either renting or buying a house. Some of them are as follows.

Advantages of Renting

Flexibility:  When renting a property, it offers great flexibility to the tenant as they can move from one place to another easily. However, with a mortgage, changing homes is inflexible because financial penalties would be incurred when breaking mortgage if that mortgage is not portable.

Less hassle and maintenance: When owning a home, the owner must ensure that each aspect of the house is maintained to ensure satisfactory living conditions. On the other hand, when renting a property, this responsibility does not fall on the tenant and the owner of the property must ensure proper maintenance before renting the property to another tenant.

Cheaper: Renting a property is commonly cheaper than acquiring a mortgage, at least in the short term. It is also essential to highlight that for many individuals acquiring a mortgage is not an affordable option due to their household income. Hence, renting a property becomes the most affordable choice. Also, renting can provide more disposable income that can be invested or spent.

Access to alternative investments: Being a renter can provide certain investment opportunities as well. Renters can save cash monthly enabling them to invest in their education, the stock market, or towards establishing a business.

Advantages of Buying

Stability: By owning a home, a person can adjust the place to their own liking by painting a room, replacing the floor, or renovating the entire house. Furthermore, by owning a home, there is no worry about having to move at the end of the rental period.

Retail Capital Gains: By owning a home, the homeowner can capitalize on the benefits received from increasing property value. The additional home equity can be pocketed by the homeowner and the capital gains can be realized once the owner sells the property.

Building up Equity: When purchasing a house using a mortgage the owner can build up equity on their houses while paying down their mortgage. Although some portion of the mortgage payment goes towards the payment of interest on the loan, the remainder is paying off the mortgage principal.

The basis of the rent vs buy debate is that the person must have a financially stable lifestyle, however, neither buying a house nor renting one would guarantee financial stability. Nevertheless, this debate can be settled through budget management. By managing budgets, it becomes easier to make financial decisions, allowing a person to achieve both their goals and ambitions. It is essential that when deciding to buy or rent a house, the costs should match the budget that has been planned. Click here to find out how much you can afford.