Jamie Stewart

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Renting vs. Buying a Home

Renting vs. Buying a Home

If you are at a point in your life where you are considering homeownership, you probably have some questions. Whether you are currently living at your parents’ home and looking to take the first steps out on your own, or are currently renting or rooming with someone and want to break-free, there are lots of things to consider!

From renting an apartment to owning a single-family home, it all comes down to where you see yourself living and what you can afford. The question then becomes renting versus buying. The beauty is, there is no right or wrong answer when it comes to this discussion, but it is important to look at all the angles before making a decision.

To help you with this, we have broken down the reasons and benefits of renting, as well as the reasons and benefits of buying - and why owning can still be possible, even if you're unsure.

Pros and Cons of Renting a Home

One of the most common reasons that people rent is affordability and the belief that renting is cheaper than owning a home. This can be true in that there is no upfront cost with renting, but you also don’t gain equity either. In addition, there can be times when monthly rent costs are higher than monthly mortgage payments.

Another reason someone may choose to rent is that they simply aren’t sure where they want to live, or maybe they cannot find a place that fits their needs. If you are new to an area, you may want to rent in the meantime so you can get to know the neighbourhoods and determine which area is the right fit for you. In some cases, you simply may be unable to find a home that is affordable to buy in the area you want or within a reasonable commute from your work.

To give you a better idea of whether or not renting is right for you, we have put together a little list of pros versus cons to help you decide:

Pros of Renting Property:

●      Less maintenance

●      Fewer repairs

●      Lower upfront costs

●      Short-term commitment for people unsure of where they want to plant roots

●      Protection from potential decrease in property value


Cons of Renting Property:

●      Monthly payments may increase

●      Potential for being evicted / lease renewal not being approved

●      Paying into someone else's mortgage instead of building your own equity

●      Requiring permission to paint or remodel


Pros and Cons of Buying a Home

When it comes to buying, there are many great reasons to consider owning your first-home - and Canadians know it. In fact, even for Canadians 35 and under, more than 40% of households own their own homes! Overall, Canada’s homeownership rate is close to 70%.

One of the main reasons that people choose to buy is for the stability and peace of mind that comes with owning the place you live. This means you are not at risk of being put in a situation where the landlord wants to move their parents into the basement suite and you have to leave or have to deal with increased costs if you go to renew a lease agreement.

For others, the benefit of buying comes in building up equity and ensuring that nest egg for your future. When you choose to rent, you are paying into someone else’s mortgage and into their future but when you work towards buying your own home, suddenly all that money you invested is going to your future instead. This is an extremely important aspect to consider in today’s age when many are having trouble with the idea of saving for retirement.

To further show the benefits and costs of buying, we have broken down some pros and cons to help you to determine if this is the right path for you:

Pros of Buying a Home:

●      Freedom to renovate or modify your home as you wish

●      You are building up equity in a safe, secure investment as you pay down your mortgage

●      Potential for additional income if you have a rental suite

●      Stability and peace of mind from being in control of your investment and owning the place where you live


Cons of Buying a Home:

  • The risk of losing home value when you sell

  • Responsibility for ongoing costs, including mortgage principal and interest, property taxes, insurance and maintenance

  • Monthly payments can increase if interest rates go up at renewal time

  • Possibility of unexpected and potentially costly repairs


Yes, You CAN Buy

Now, you may be thinking “how can I afford to buy a house?”. The reality is that if you can afford to pay the high cost of rent in today’s market, then you CAN buy. In fact, it may surprise you to find that 4 in 10 households spend over 30% of their pre-tax income on rent! This is higher than the commonly accepted affordability threshold.

The truth is that, in the long run, homeowners are often financially better off than renters. This is because homeownership enables forced savings that accumulate over the years, growing into a sizable nest egg. If you are unhappy renting or really prefer the idea of owning your own home, you CAN - all you need is the right information and the right preparation!

To determine if you are able to purchase a home, a good place to start is with My Mortgage Calculator. This is a perfect tool for seeing what you can afford. Using this tool to calculate minimum down payments and monthly mortgage costs can help you to get a good picture of the financial landscape and your options. Looking at your budget and evaluating your current rent costs and other monthly expenses can also help you to determine your affordability bracket.

Some other things to consider before buying include:

●      Your credit score - do you have good financial standing to be approved for a mortgage?

●      Your savings - do you have any money put away for a down payment? If not, do you have wiggle room in your budget to start saving?

●      Your time - do you have the resources to maintain a home, from the yard to any necessary repairs?

Regardless of whether you choose to continue renting or make the leap to owning your own home, the most important factor is your financial security. Getting the right information and looking into all the options will ensure that you are making the best decision for yourself. And, of course, be sure to contact a mortgage professional to get pre-approved today and to see if you can make the leap from renting to owning!


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