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Should you rent or buy your home?

Cityline | posted Wednesday, Jul 20th, 2016

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Buying a home is a dream for many, but it might not always be the most realistic choice. Personal finance expert Bruce Sellery explains the pros and cons of buying or renting a home in today’s housing market.

Financial factors to consider when buying include:

  • The price of the house
  • Amortization in years
  • Condo fees
  • Property taxes
  • Utilities
  • Maintenance – paint, roof, appliances, etc.
  • Renovations
  • Price appreciation – how much will the price increase?
  • Duration: how long will you live there? Real estate commission: five per cent of the sale price ($600,000 house is $30,000 thousand).

Other important factors to consider when thinking about buying a home:

  • It is a trade-off. For example, if you want a walk-in closet, is it worth sacrificing a vacation in the sun?
  • The bank will calculate what you can afford based on whether you will default on the loan – they do not consider any other investments such as retirement savings, kids’ education or any personal luxuries.

Financial factors to consider when renting include:

  • Price of rent
  • Investment return – you have to invest that money, how much will it earn?

The advantages of owning a home include:

  • Forced savings: you might not pay your credit cards or your car loan, but you will pay your mortgage.
  • Nesting: some people just want to own and fix their place up just the way they want it.

The advantages of renting include:

  • It is cheaper – it can cost less, depending on where you live.
  • It is worry-free – if you have a good landlord, you can call them when the roof leaks.
  • It is flexible – you’re 27 years old, you can accept a job and move across the country at a moment’s notice.  It is way harder to do it if you own.
  • It can free up capital – a senior without a pension.  If all your money is in your house, how are you going to pay for groceries?

Courtesy of Cityline

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