Is it better to buy or rent? Yes, renting can have some advantages. There is very little upfront investment (usually only first and last month’s rent) and there is no long-term commitment beyond the lease term.
However, for most, purchasing and owning a home is a much better option. For some the reason is purely emotional. But the bottom line is that you will save more money over time by purchasing over renting. You will realize other financial benefits such as property appreciation and a “forced” savings plan, building equity each and every month.
Sure, as a Mortgage Broker, I am supposed to say this. But, when all things are considered, homeownership rules over renting in almost every case.
In October 2017, CMHC surveyed 2,507 prospective home buyers on-line. Respondents were all prime household decision-makers who intend to purchase a new home within the next two years, including approximately 1,500 First-Time Buyers, 500 current owners, and 500 previous owners.
The survey results highlight that:
- First-Time Buyers and Previous Owners share the same top motivator to purchase a home: they want to stop renting. Improved accessibility (physical obstacles and barriers) and investment opportunity were also noted as top motivators across all groups. Changes to mortgage regulations and concerns about possible future interest rate increases were not among the top motivators.
- The majority of future home buyers intend to obtain a mortgage to finance their home purchase, with First-Time Buyers showing higher incidence compared to Previous Owners and Current Owners.
- Among all groups, the two most common actions completed one to two years prior to the purchase of a home were saving for a down payment and determining what type of home to buy. On the other hand, in the last three months before purchasing, about two-in ten of prospective buyers pre-qualify for a mortgage.
Own What Appreciates
We’ve been in a cycle where home values have been steadily rising. When you own your own home, an environment of rising home values means you not only gain equity in your home when you make your payment every month; it also rises with the value of your home.
So, not only do you get the benefit of having a roof over your head and a place to entertain family and friends, you also have the benefit of owning real estate. For each month you make your mortgage payment or your home value rises, it’s increasing your net worth.
Equity in the home can help you in the future. Convert the equity into an investment or use it home repairs or improvements, children’s education or any other reason you see fit.
Who benefits when you rent? The landlord is seeing the benefits of those equity gains.
The Down Payment Monster
No, you don’t need 20 percent down payment. There are options that allow prospective buyers to get into homes with as little as 5% down. Further, there are rebates on land transfer tax, RRSP Home Ownership plans, and tax savings that are available to First-Time Buyers.
Waiting for interest rates to go down, afraid they may increase, fixed rate, variable rate, etc. There are many variables and many things to consider. However, the most important thing is to consider your purchase, plan for it, and then investigate all available options before you move forward.
Every situation is different. Carefully consider your financial situation to pick the loan that’s right for you. That includes exploring all interest rate options.
Improvements Are For your Benefit
Weather your rent or own, your property will require improvements from time to time. As a renter, although major improvements may be covered by your landlord, you will still need to maintain the property and make minor improvements. Again, this benefits your landlord. As a homeowner, you increase the value of your property with any improvements you make and you enjoy the benefits.
Owning your own home can be a very rewarding and financially sound investment. Consider your current financial situation as well as your lifestyle to decide if it makes sense for you. Can you afford to make a down payment, pay a monthly mortgage and pay for any items that break or need repairs in your home?
We have assisted many clients over the years in transitioning from renters to homeowners. Purchasing a home can become a reality if you plan and position things accordingly.
VERICO The Financial Forum Ltd.
“Your Connection To A Better Mortgage”
Together, We Make Mortgages Easy!