Many Canadians dream of buying a home. It’s a big goal that comes with a feeling of stability and accomplishment. Yet while home ownership has several advantages — both financial and emotional — it’s not for everyone. Renting a home can be highly appealing to those seeking freedom and flexibility, as it opens up other financial and personal options.
So what’s right for you?
The decision to rent versus own is a highly personal one, so figuring out your route begins with understanding what’s most important to you – in a home and in life.
Here are 7 questions to ask yourself that can guide your thinking and help you settle your internal debate.
Do you envision living in the same home for a long time?
When you own a home for a long period of time, you can build equity over the years. As home values increase — which they have historically done — that equity rises such that your home becomes a significant asset.
On the other hand, if you plan to move frequently, home ownership may not be your best option. Between real estate fees, land transfer tax and the potential penalties to break a mortgage early, the costs can add up quickly. If you’re not planning on staying grounded for a while, renting may be ideal for you.
How secure is your financial situation?
Owning a home is a considerable financial commitment, both in terms of your mortgage payments and ongoing maintenance costs. What if your furnace needs replacing, or you find water in the basement? Will you be able to cover unexpected and sometimes urgent costs? Before deciding to buy, it’s important to feel confident that you can meet the ongoing demands of home ownership.
While monthly rent may not necessarily be cheaper than a mortgage payment, you often bypass major expenses while renting, leaving those responsibilities to the landlord.
Do you consider yourself a free spirit or do you crave stability?
Everyone is different, and the decision to rent or buy often comes down to your personality. Renting can offer freedom and flexibility to move around more without incurring major expenses. If the idea of being tied to one place for a while makes you uneasy, renting can give you the spontaneity you need.
If you’re the type who prefers the feeling of being settled and stable, however, owning a home can provide the foundation you’re looking for.
How do you feel about roof repair or fence building?
The costs of maintaining a home have already been covered here, but there is also the time and effort required to keep up a home. While general maintenance such as lawn care and paint touch-ups are typically part of the routine whether you rent or own, more extensive work often comes with ownership. From building a fence to repairing a roof to sealing cracks in the foundation, staying on top of maintenance is part of a homeowner’s job description.
Many people enjoy the tasks that come with home ownership, while others don’t. Which side of the fence do you land on?
Are you a diligent saver?
With a mortgage, you’re required to make regular payments, which are made up of both principal and interest portions. With every payment you make, part of your principal is paid down, which means you’re building equity in your home (aka your investment). As a result, owning a home can be considered a forced savings plan. If you’re not a diligent or natural saver, this forced savings enables you to grow your net worth without additional effort.
If you rent, you’ll therefore want to be diligent about putting money aside on a regular basis, and be intentional with your investments so that you can build wealth in other ways. If renting is right for you, be sure to have a regular savings plan in place.
Do you value location over most other factors?
Where are you looking to call home? If it’s in one of the country’s more desirable urban locations, it may be easier to find a place to rent. Since real estate in some of the country’s hottest spots can be harder to come by, ownership can be tricky if this is what you most value.
If your priority is a big home with plenty of green space, however, buying may be the best way to go.
What does your gut tell you?
Because the decision to rent or buy is so personal, you have to do what feels right. Some people dream of owning a home above all other goals. If that’s you, then you’ll want to find a way to own. If the idea of owning makes you break out into a cold sweat, don’t force it. The best move is to stick with whatever is right for you.