Is it time to buy a home or condo, or should you continue renting? The answer to this question is that it depends on your lifestyle preferences and other circumstances. Choosing to rent or buy your home is a major decision that affects both lifestyles but also your financial stability.
There are a number of things to consider when making a decision.
What’s Your Time Horizon?
The length of time you plan to live in your new home is one of the key factors that should influence whether you decide to buy or rent. The general rule is that the longer you decide to live in the home the more it makes sense to buy. As real estate is a long-term investment and there are real estate costs involved in selling a home it may possibly outway the equity appreciation of the home.
Although the Ontario real estate market has experienced decades of positive appreciation owning a property for less than 3 years may not make sense to buy but to rent instead as this will provide you with more flexibility. However, if you plan to live in the home for the next 3 to 5 years the decision to buy is likely a better decision.
How do you determine how long you are going to live in your new home? Your decision should be driven by lifestyle desires and needs for now and in the future. The goal is to choose a property and location that will account for many factors and as a result, reduce the likelihood that you will need to move again in the near future.
Benefits and Disadvantages of Renting
The decision to rent brings with it many benefits and also some drawbacks depending on your circumstances and lifestyle. Renting provides you with flexibility should you require to move locations frequently, as at the end of your lease you can move without penalty. However, it could also mean that you could have to move suddenly if your landlord decides to sell the property or decides that they or a family member needs to move in.
Renting does also provide predictable monthly expenses during the term of the lease as the landlord is responsible for all unexpected repairs and maintenance. However, as a renter, you could face unpredictable rent increases at the end of your lease term (unless your rental falls under rent control rules).
A benefit of renting is that you have no accountability to maintaining the property however you also can’t personalize your home. You normally can’t make any modifications to the rental unit such as painting, replacing countertops, or upgrading appliances.
Benefits and Disadvantages of Owning
There are many intangible benefits to owning a home. Things like a pride of homeownership and a sense of stability and belonging to a community.
Owning a home should be a long-term strategy and for those that need or want to move frequently either because of personal lifestyle choices or because of employment needs owning a home may not make sense. You might not be able to sell when you need to because the housing market may be down and there are also significant costs involved that may not be recouped if you have owned the home or condo for a short time.
In addition to the intangible benefits of owning a home, there are also, tangible benefits such as home equity appreciation, being able to renovate and make changes to personalize your home to your tastes, and eventually being mortgage-free.
Homeownership does make sense from a financial perspective because a portion of your monthly mortgage payment goes towards paying down your mortgage, your home increases in value (equity), and your equity in your home does not incur capital gain taxes when you decide to sell.
Homeownership is a simple investment and part of the appeal of homeownership is that it makes investing in your future simple. Once you pay off your home you have an asset that you can use throughout your life – no need to worry about GICs, bonds, stocks, or other financial products – unless of course, you want to).
Ultimately which option makes the most sense for you and your family is about your lifestyle, comfort, and your vision and desires for your life.
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