Should I Rent Or Buy A Home?
Ah the age old question. Everyone’s been telling you that renting is a bad idea. After all, you’re just throwing money away right? Every month you’re making your landlord richer, while you spin your wheels and never build any equity for yourself.
Seems obvious: Buy a home as soon as you’re able and start securing your financial future.
If only it were that simple.
The fact is, owning a home is not simply a case of paying yourself your own rent and reaping the enormous benefits. There are many more additional costs that you avoid with renting, not to mention having to deal with every problem yourself instead of relying on your landlord.
Reasons Why Renting a Home is Awesome
Freeeeeeeeeeedooooooommmmmmmmmmmmm! Got a little excited about that one. Of course when you’re renting you have a lease, but typically you’re going month-to-month after your first year, making it relatively easy to leave after that. If you’re someone who moves around a lot, has an unsteady job, or may have a changing life situation like marriage or kids, locking yourself into a mortgage might not be the best idea.
Never deal with a broken toilet, or a broken anything else. Apart from changing a light bulb, your landlord should be taking care of any major repairs to your apartment. Leaky pipes, cracking ceilings, mouldy tiles, and everything else you want to avoid taking the time and money to repair, you get to let someone else deal with it.
No one wants to upgrade someone else’s home. Of course you want where you live to feel like home, and that might include some new furniture and some paintings for the wall. What it won’t include are expensive upgrades like hardwood floors, upgrading kitchens, and building that sunroom in the back. Of course you won’t HAVE those things, but renting becomes a sort of forced savings in that you’ll have less to spend your money on than if you owned a home.
No extra costs. Aside from maybe cable and possibly some utilities, you should have no additional expenses with a rental. No property tax, property insurance, trash pickup fees, etc. Just pay your rent and any utilities you owe, and you’re good to go.
Why Owning a Home is Awesome
It’s YOURS. All those upgrades you wouldn’t do to your rental? Now you can do whatever you want. Knock down a wall, put up a wall, build an addition, rent out your basement, and anything else you want to do. This is your HOME, and you can live however you want in it.
Build equity. Not at first of course. At first most of your payments will go towards interest. Slowly but surely, you’ll start seeing the equity portion creep up, and soon enough you’ll actually have something to show for all your hard work. Unlike renting where you’re always hovering at zero, home owning equity will eventually give you the freedom to move up in house or retire more comfortably.
Make a killing when you sell. Depending on the market when you bought and when you want to sell, it’s possible to make a very high return on your investment. The calculator for this can be tricky, because it’s always more complicated than: Selling price minus buying price. If you get lucky however, you might end up with enough profit to buy another home or do whatever else you’re planning to do much more comfortably.
Which Kind Of Awesome Do I Want To Be?
Unfortunately, the answer is always the same: it depends.
If you can afford it, you plan on staying in the same place for the foreseeable future, you enjoy maintaining a property (or think you will), understand the true costs of owning a home, and have a down-payment and decent emergency fund, then you’re probably ready to buy a home.
On the other hand, if you’re not sure what your living situation will be, your family might be growing soon, your job is unstable, you hate using a hammer, and you can just squeak by the pre-approval process with your bank, you might be better off renting for a while until your situation becomes clearer.
As always, we’re here to help with any and all mortgage and financing related questions.
A great place to start are our mortgage calculators.