Renting vs Buying

Why Buying a Home is a Good Thing!

You are the one in control

The freedom and privacy offered by home ownership tends to be greater than that offered by renting. When you rent you are normally restricted as to what improvements you may or may not make. It also doesn’t make sense to expend the energy and undertake the expense of improving your landlord’s investment. When you own your own home you are in complete control.

The principle of leveraging

Leveraging is the ability to only invest 20 percent, 10 percent or less yet still control 100% of the property. If property increases in value the owner reaps the full value of the growth in equity.

Upward mobility

As your equity increases you can again use the principle of leveraging and use your equity to step up into a better home. Without significantly increasing your monthly housing expenses you should be able to trade up not too far into the future.

Forced savings

Your house is your own automatic savings account highlighting equity build-up. Each mortgage payment made consists of principal and interest components. While during the early years of ownership the principal accumulation is relatively small it does increase with every payment. As the loan is being paid the principal amount of the mortgage decreases and the owner’s equity position increases. This equity can be used to leverage into a larger property.

Stability

In a turbulent world home ownership provides a real sense of security and stability.

Hedge against inflation

Unlike renting, once you have committed to mortgage payments they remain constant for the full term of the mortgage. As inflation hits elsewhere your monthly mortgage housing expense remains constant until you re-finance.

Ralph Kramden says “be the king of your castle”

You derive the benefit of living in the environment which you have created for yourself. Enjoy the opportunity to express yourself and the pride of ownership it generates. Customize your home design, décor, architecture, landscaping, and improvements as you deem appropriate. It’s your castle.
Ottawa says “no capital gains tax”
There is no capital gains tax due when you sell your principal residence in Canada.

More space

Usually you get more space in a home (or condominium) you purchase. More rooms, bigger rooms.
It’s better!

You aren’t forced to listen to the music from apt. 3B!

When you own your own home your neighbours are usually further away. It’s better too!

Monthly cost often not too much more than renting, sometimes less!

Rental clients are often surprised to find out how large a mortgage can be carried by an amount equal to their rental payments. Additional financial commitments are the investment of a down payment and all other monthly payments associated with home ownership. Review our Closing Costs Workbook.

Tax benefits of owning an investment property

The Canadian government has encouraged the ownership of investment residences (ones which you rent out to others) by providing income tax deductions for the payment of mortgage interest, property taxes and all other expenses related to its ownership. These benefits considerably reduce the net out-of-pocket costs of investment property ownership while allowing you the benefit of this property’s equity build-up.

But on the other hand…

This may not be the right time for you to own if…

You might not “stay put” for a few years

Don’t put yourself in the position where you might have to sell in the near future. There are expenses and commissions affiliated with selling. Give the house time to appreciate. Don’t buy until you are reasonably certain that you won’t have to move for at least the next three years. The smaller your down payment the longer you should plan to live in the house.

You don’t have the downpayment

Wait until you save it. You will need a significant amount of cash up front. An absolute minimum is 5 percent. Any wealthy uncles willing to spot you a loan?

You still crave mobility

If you own your home it’s not as easy to pull up stakes as it is when you’re renting.

Your job future is uncertain

If you lose your job and can’t make your payments you could lose your home and the money you’ve invested in it.

Your marital future is uncertain

It is very sad when clients divorce and are forced to sell a property that hasn’t had the time to appreciate. The time to buy a house is not when you sense an upcoming split. You’ve had some recent credit problems. You need a clean credit record to be approved for a mortgage. Re-establish yourself first, then buy.

You can just afford it

Wait until you can comfortably afford it. Don’t overextend to the point that you can’t do much else. Life is too short and being house poor really isn’t much fun.

Believe that property values will decrease over foreseeable future

Wait until the marketplace and your research lead you to conclude otherwise.

You’ve always hated playing Mr. Fix-up and you have a reluctance to pay exorbitant rates for contractors

Seek help or wait to buy until you come to terms with at least one of these issues.

Suggestion

To quickly see what size mortgage the rent you are currently paying would carry, skip to the back pages of the “Mortgage Affordability Workbook” and plug your rental payment into the “Principal And Interest (P.I.)” slot in the final calculation.