Renting versus buying a home is a big decision, and there are pros and cons to each option. In recent years, a higher percentage of Canadian households were renting than at any point since 1965.
Pros of Renting:
- Fewer upfront costs and paperwork
- Freedom to be more mobile
- Not responsible for maintenance or repairs
- No need to worry about falling home values
- Build credit (if your landlord reports rent payments to the credit bureaus)
- No property tax bills
Pros of Buying:
- Build equity and credit
- No Landlord to answer to
- More stability (especially with schools)
- Possible tax benefits (depending if you are a First Time Home Buyer)
- Can make improvements or upgrades to your taste
Cons of Renting:
- Landlord can raise the rent or sell the property
- Choices may be limited depending on vacancies
- Might have to move multiple times
- Don’t build equity
- No tax benefits
Cons of Buying:
- Requires substantial money, paperwork upfront
- Could lose money if home values decline
- Extra expenses beyond mortgage payments
- Rising home prices and low inventory in many markets
- Responsible for repairs, remodelling, etc.
Is Buying Cheaper than Renting?
There are different costs associated with renting vs. buying, and they depend heavily on where you live and the local housing market. Using a rent vs. buy calculator can help you break down some of these expenses.
Most rental properties require a key deposit, for example, which protects the landlord against lost or damaged keys, fobs, or garage door remotes caused by the tenant. You’ll usually put down the first and last month’s rent payments when you sign a lease. When evaluating a lease contract, ask if your monthly rent includes utilities such as water, hydro, gas, cable, or internet.
For homebuyers, one of the biggest costs of homeownership is your monthly mortgage payment, which includes the loan’s principal and interest. Your payments can go up or down over time if your loan is variable-rate or your property taxes or homeowner’s insurance premiums change.
Having a sizeable down payment — anywhere from 5 percent to 20 percent of the home’s purchase price — is expected. If you put less than 20 percent down, your lender will typically require you to purchase mortgage insurance, which drives up your monthly payments, too.
During the homebuying process, the buyer will need to pay for a home inspection, and for any quotes for repairs needed from contractors. They will also put down at least 5 percent of the sales price for earnest money.
As a homeowner, be prepared for some of the hidden expenses that come with homeownership that catch many first-time homebuyers off guard and may lead to buyer’s remorse.
If you’re purchasing a property in a condominium, you’ll also need to factor in monthly condo fees, which can cover services like landscaping, exterior maintenance, amenities, and other monthly expenses.
How do I know if I’m Making the Right Decision?
If you are considering buying, the first step is to speak with a Mortgage Agent, who can determine the amount you’ll be pre-approved for. Once you know that amount, book a call with Caryn Parchment, an Expert Greater Toronto Area Real Estate Agent, to discuss your options.