Rent or Buy?

Rent or Own CroppedWhile the concept of gathering equity through home ownership is an attractive one, the answer to the question concerning renting vs. buying your home is not clear cut. There are a number of factors that need to be taken into consideration.

Are Monthly Payments Really the Same?

When looking at mortgage payments in opposition to rental payments, it is important to examine them in the right context. While the appeal of building equity for yourself rather than someone else is not in dispute, there are more payments and expenses on a monthly basis when you are an owner rather than a renter.

While the actual mortgage/rent payment may be similar in terms of dollar amount, don’t forget that there may be additional expenses around hydro/property tax/insurance that you are not accustomed to paying.

What Type are You?

What type are you- meaning what property type are you after? Do you seek a single family home (which are generally more expensive) or are you thinking about a condo or a townhouse? Realize that certain types of properties require owners to pay additional monthly fees to cover things like snow removal and maintenance, which have to be factored into your monthly payments.

How Elastic is Your Budget?

Do you have any wiggle room at all in your monthly budget? When you own a home, you are your own landlord. You are responsible for all repairs and maintenance. How would your budget withstand emergency house repairs (i.e. your furnace breaks down in deep, dark February)?

If you are a DIY person, and they know you by your first name at your local hardware store, then you may be able to perform a number of repairs yourself. If not, realize that home maintenance is a costly (and usually an ongoing) commitment.

Do you Want the Responsibility?

Home ownership is not for everyone- not just because of the extra work and maintenance, but because of the responsibility attached with owning (and owing on) such a large asset. Does it fit into your lifestyle? Are there lifestyle changes you are willing to make to make home ownership a wise decision?

How Flexible Are You?

The one benefit to renting is that with a couple months’ notice you can up and switch homes, neighbourhoods or even cities as it suits you.

Home ownership is decidedly illiquid. Forget all the shows you’ve seen on TV, where people come in and buy a home and then flip it in a few weeks for a grand profit. Most markets in this country are not supportive of that kind of activity, and real estate is a slow moving investment that requires you to stay put for longer periods of time.

What does the Rest of your Debt Load Look Like?

Are you maxed out? It may not make sense to take on extra debt (and a sizeable one at that), if your debt load is significant and your savings are small. You are most likely better served to pay down debt and accumulate some savings prior to a property purchase, even if you qualify under bank conditions already.