When determining a living place, one of the most common questions is between renting vs owning. It isn’t easy to choose between the two possibilities. Any decision you make will directly influence your financial condition, present lifestyle, and future personal ambitions. It should be no surprise that both have benefits and drawbacks, challenging your choice. However, this subject will undoubtedly arise in everyone’s life at some point, and the need of the hour is to determine how to make a more informed decision.
Continue reading to learn about the different elements to consider while deciding between renting vs buying a house and how to factor them into your existing situation.
Renting – The Joy of Freedom
Renting is a fixed recurring return made by a property renter to the owners for occupancy as an agreed payment at specified intervals. Rental homes allow you to live life on your terms by preserving your independence and flexibility while also enjoying the benefits of living in areas you prefer.
Quick Fact: Nearly 30% of Canadians, or 4.4 million, rent their homes. So, one in every three Canadians rents a house. But renters are increasingly under duress as Canada’s affordable rental housing becomes scarce.
Even though renting may be the better option for certain people depending on their financial situation, it has several drawbacks.
Owning – Financial & Living Security
The legal right of a person, organization, company, or government to hold possessions is known as property ownership. Along with the concrete financial and living security that comes with ownership, there are intangible benefits such as a feeling of security and financial satisfaction.
Quick Fact: The rate of house ownership in Canada has consistently climbed over the previous 20 years. Between 1997 and 2018, it averaged 65.97 %, marking an all-time high.
As a homeowner, you have a lot of obligations, and it is also an expensive alternative to pick, but don’t forget the long-term benefits as discussed below.
Renting vs Owning – 3 Crucial Factors That Will Help You Choose
Homeownership gets even more frequently viewed as a means of realizing the Canadian dream than the American Dream. However, owning isn’t always better than renting, and renting isn’t always more accessible than owning. The following are the critical elements to consider while deciding between buying vs renting
Cost of Your Decision
Your economic status meaning how you are performing in your financial life, is one of the most crucial variables to consider while making this decision. Why not invest towards purchasing your property if you have adequate money instead of paying monthly rent payments? Because homeownership is the ultimate goal for many, nearly 89 % believe that the advantages of owning outweigh the disadvantages. But owning a property comes with a slew of upfront costs, including a significant down payment. You may have to pay off your mortgage or standard utilities.
Because buying a house isn’t for everyone, renting homes allows you to know precisely how much you’ll be spending on housing each month. It only needs a one-month security deposit; you are only responsible for paying the agreed-upon monthly sum, which may or may not increase during the contract.
So for renting vs owning, if you simply couldn’t afford the monthly mortgage payments, keep renting and save money. But you build nothing over time spending and living in someone else’s home.
Quick Fact: The homeowner’s mortgage is less than the renter’s monthly payment if the computations get done over a more extended period.
Flexibility vs Equity
If you choose to pay off your mortgage and lower the amount you owe over the years, you will save money since the value of your property will rise over time; it is just as the value of your bank account will increase with interest. A property’s increased worth might result in the owner turning a profit when they sell it or earning more money from their tenants through monthly rent.
On the other hand, rental homes allow you to reside almost anywhere, thanks to tailored, flexible agreements. Although rentals might be expensive in certain areas, you can always find a monthly payment that is less expensive than buying a home.
However, a house owner will end up with significant investment for the future that a renter would never have. So, if you don’t intend to dwell anywhere or make a future investment, renting is the way to go.
Fact: Between renting vs owning, Home depreciation can occur for various reasons, while rent may increase yearly due to property taxes.
Taxes, Repairs & Maintenance
All of your revenue goes to the landlord if you lease a property, and none of it is tax-deductible. If you’re a homeowner, this changes as they may profit from some taxes. The most significant tax advantage of owning a property is that the estimated rental income received by homeowners is not taxed.
Fact: The Canada Revenue Agency offers many tax advantages to help people pay to buy a property.
On the one hand, homeowners can save money on taxes. Still, maintenance and repair expenditures, as well as a long-term commitment, are pretty expensive. Homeowners should budget $1 per square foot of useable area for annual home upkeep expenditures when purchasing a new house. Conversely, a tenant merely pays a monthly fee to reside there. The rental contract will specify a landlord’s legal obligation to pay for property upkeep expenditures.
Verdict – Renting Vs Buying?
There isn’t always a straightforward solution for picking between renting vs buying. However, renters do not have the option to make long-term investments in their homes. Even in the long run, you will pay a lower mortgage than you would if you were renting every month.
Purchasing a home is one of the wisest investments you can make right now. Because it all boils down to simple logic. If you have to spend money on housing every month, you may as well pay for a mortgage rather than give your money to a landlord. So, what’s the point of renting?
Contact The Blackwell Group today to learn how we can help you get the home of your dreams.