Rent or Buy? Which is Right for You?
With the rising cost of both house prices and rental rates, the decision between renting or buying your next home is tougher than ever. It’s no longer a given that buying a home is the better choice. We’ve broken down some of the biggest considerations to help you make the right choice between renting and buying your next home.
Renting vs Buying – It’s a Lifestyle
There are a lot of differences between renting and buying a home. And which option is right for you will depend a lot on your lifestyle and future plans. Before looking to your finances for the answer, you should first decide how you want to spend your time and where your priorities lay.
Renting a home gives you the freedom to travel, relocate if you so desire, and spend your free time pursuing your favourite activities. Renting also gives you a fairly fixed budget without any major surprises. Owning a home, on the other hand, requires a large investment of both time and money and often comes with unexpected expenses. But owning a home also means your money is going towards your future rather than someone else’s.
Think About Where You’re Going
Before you decide to buy a house because it’s the expected next step, stop to consider where you really want to be going. If your dream is to live in another city, province or country, this may not be the right time for you to buy. It’s generally a good rule of thumb to plan to be in the same home for at least 5 years if you’re going to buy. And the longer you stay, the more equity you will likely accumulate.
The Down Payment
Saving up for a down payment is one of the biggest obstacles when it comes to purchasing a home. The amount you’ll have to put down will vary depending on the purchase price of the home. Additionally, you’ll also have to purchase mortgage insurance if your down payment is less than 20% of the purchase price. With the current cost of housing in Ottawa, it’s not uncommon for a down payment and mortgage Insurance to be well over $50,000.
For many people, it can be extremely difficult to save up such a significant amount of money. If that’s the case, renting is likely the better option for you. Renting generally requires an up-front payment of 2 months’ rent plus a security deposit. While this can still be a fairly large amount, it is a much more realistic goal than a mortgage down payment.
Buying vs Renting – The Additional Expenses
One of the nice things about renting a home is there aren’t a lot of additional expenses outside your monthly rent payment. Some rental units even include heat and water in the price meaning your utility payments are also minimal. This can make it easier to stay on budget and to set money aside for a future down payment or other investments.
Between bills, maintenance, upgrades, tools and supplies, the cost of owning a home can add up quickly. Especially if you own an older home or require a major repair like a new roof or furnace. But the more you put into your home, the more it will increase in value. That means if you have the available income, investing in maintaining a home will pay off in the long run. Unfortunately, you won’t see any returns on the money you pay towards rent.
Know the Risks
They say timing is everything, and this is especially true when it comes to real estate. Supply, demand, available inventory and interest rates can all cause shifts in the housing market. Right now, interest rates are predicted to rise so acquiring a mortgage can be riskier than when rates are on the way down. Working with an experienced real estate agent and mortgage broker is the best way to ensure you are aware of the risks and aren’t getting in over your head. Premier’s team of experienced Ottawa Realtors® can help you navigate today’s market and find the home that’s right for you.
Rent or Buy – Which is the Better Investment?
There was a time when there was no question whether it was financially better to rent or buy a home. But the rising cost of house prices are making it unrealistic for many potential buyers to purchase. Rather than buy and be house-broke, renters have the option to invest the money they would have put towards purchasing a home on higher-return investments.
But as long as you are willing to wait for your home to increase in value, owning a home is almost always a good investment. And if you plan wisely, you could have your home paid off and enjoy the security of much lower payments in your old age.
The choice between renting and buying involves a lot of different factors. We can help you understand your options and find you the right place to rent or buy. Contact us today to get set up with a custom search so you won’t miss out on the perfect home.