Each year thousands of Torontonians ask themselves this question – Should I buy, or should I rent? The answer is not an easy one. There are advantages and disadvantage to both buying and renting that go beyond personal finances. Deciding to buy or rent also depends on your chosen lifestyle, current and future life and employment goals, and the market conditions in your community.
To help you navigate the Buy vs. Rent debate, consider these key considerations:
ADVANTAGES OF BUYING
Building Equity – Think of home ownership as a forced savings program that you can enjoy while you build equity. With each mortgage payment (sans the interest) you’re investing in your financial wealth not your landlord’s.
Appreciation – Historically homes in Toronto have been proven to be a very profitable investment. Homes have increased in value year over year resulting in significant capital gains for homeowners and investors.
Personal Freedom – Owning your own home means you call the shots. You don’t need to ask permission to paint, buy new appliances, install hardwood flooring - renovate as you see fit.
Tax Deductions – The Canadian government has created a number of tax incentives for homeowners, most notably those for first-time home buyers and people with disabilities.
Privacy – No more pop-in visits from your landlord.
ADVANTAGES OF RENTING
Fewer monthly expenses - In general, rent payments tend to be less than mortgage payments, especially if you don’t have a sizable down payment; and the cost for utilities and maintenance fees are typically higher for homeowners.
No upfront costs – Other than your deposit of first and last month’s rent and potentially a key deposit, tenants pay little in moving fees. In addition to their down payment, buyers are responsible for land transfer taxes, legal fees, and various other closing costs.
Flexibility – Tenants have the flexibility to move with ease. Most leases are annual, and shorter-term rentals are common. If you’ve got wanderlust or are commitment-phobic, renting might be the best fit.
Little to no maintenance expenses – When the dishwasher breaks or the furnace stops working, you can call your landlord and they’ll foot the bill.
Financial freedom – As a renter you’ll have more disposal income for investments or retirement planning.
Still undecided?
WHEN TO BUY
You have access to the resources needed for the down payment and closing costs.
You’re financially prepared to take on the costs associated with homeownership.
You’re ready to settle down and don’t anticipate moving for at least five years.
You have a stable income source.
You have minimal debt and satisfactory credit.
You want to invest in your own financial freedom not your landlord’s.
You can afford a home you want to live in.
Your area is experiencing a Buyer’s Market.
WHEN TO RENT
You don’t have the financial resources to afford the down payment and closing costs.
You can’t afford the ongoing expenses that come with homeownership.
You’re not ready to put down roots.
Your income isn’t stable.
You have significant debt.
You can’t afford a home you want.
You need to sell your home to minimize expenses.
Your area is experiencing a Seller’s Market.
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