Buy versus rent
Everyone has an opinion on whether it is better to rent or buy their own home. Too often opinions are based on personal circumstances and often what is best for one person may not be the best solution for another. This article gives you the advantages and disadvantages of both renting and buying. Since you are the one to decide for yourself, based on what you perceive will work best for you, it is best to do some research and do some soul searching.
Advantages of renting
Price: renting can be much cheaper than buying
No Commitment – Although most landlords would like you to sign a one-year lease, this can sometimes be negotiable and it may even be possible to start with a month-to-month contract.
Maintenance free: if the oven shuts down … call the owner. If the plumbing backs out … call the landlord. If the electrical system is malfunctioning … call the owner. The only repairs you are responsible for are those caused by you or one of your guests. (Covering the toilet is the responsibility of the tenant … not the landlord!)
No Headaches – It’s easy to move on if you don’t like the place or need something bigger, and you don’t have to worry about selling or finding a new tenant.
If the housing market plummets, you don’t have to worry. If interest rates go through the roof, that doesn’t worry you. And you can always look for a cheaper place to live if you need one. If you own your own home, try asking the bank to lower your payments and see how far you can go.
Disadvantages of renting
You have no control over your own living space. You can’t renovate or decorate how you’d like, and you always have to ask permission to make changes. If you do not get approval from the landlord, you will have to return your unit to its original condition or pay for the landlord to do the work.
Most rental units have many, many regulations on smoking, pets, parties, noise, etc. If you were to buy a condo, you would probably have the same regulations, but if you bought your own home, you would have more freedom to live your own life. Have as many pets as you like. Host a party every night if you want. You get the idea. If you rent, breaking those rules can get you evicted, which can be very inconvenient.
You are helping pay someone else’s mortgage, when you could be paying your own.
If you live in an apartment, you have to put up with other people’s noises and smells. If you’re used to it, that’s fine, but it can be unpleasant at times.
Advantages of buying
Invest in yourself. You will not pay anyone else’s mortgage other than yourself. And if the bank is willing to lend you the money, you can be sure they think you can pay it back. That’s their business … lending you money. They will not give money to a poor risk.
Increased equity. You can improve your asset. New paint and flooring can add significantly to the value of your home, depending on the condition it was in when you bought it. And if the bank agrees that your home’s value has increased, you may be able to withdraw some of that equity to buy something else that is important to you, usually through a line of credit. That money can go a long way!
Elections. When prices drop, as they have lately in many North American cities, it is a good time to shop. Statistics show that real estate will always increase in value. Do you know of a house that is worth less than twenty or thirty years ago? What goes down will always go up. Real estate prices always go up and down, but they almost always go up more than before. You don’t have to buy when prices are high, but you can buy what you can afford if you don’t want to wait for another real estate slowdown.
Liberty. You can do whatever you want. The only people who can stop you are the police, the building inspector, and the health department! Well, maybe some others too. But you can have as many pets, parties and friends as you want.
Pride of ownership. This is very important to some people. There is nothing like the feeling of living in something that belongs to you! Mowing the lawn or shoveling the driveway in a rental home is not as satisfying as mowing your own lawn and shoveling your own driveway.
Stability. You cannot get a notice that your unit is being sold, or you will have to move because the landlord wants to do major renovations.
Long-term benefits. When your retirement days start to loom on the horizon and your house is paid for, life can be very good. If you are still making those monthly rent payments, you will likely have to pay them for the rest of your life. And rents seem to increase faster than pensions!
Disadvantages of buying
Be cooped up. For some people, it doesn’t make sense to buy. If you think your job will take you to another city every few months, it’s probably not a good idea to buy and sell your home every time it is transferred. Even if you only move once a year, it is expensive to sell and then buy another home each time.
Maintenance. You are the one who will have to take care of all those little problems … toilets, sinks, leaks, mold, electrical problems, etc. If you have to hire someone every time something goes wrong, it can get expensive.
Paying the bills. Rental units often come with some utilities that you pay for, such as water and sewer, hydro, or gas. And it’s nice to turn up the heat on those cold days knowing someone else is paying for it. And if you can’t pay your bills, there are consequences.
Affordability Not everyone can come up with a 5% down payment. You need cash to buy a house. Saving is not easy, not even possible for many people. And if your credit rating is low, the bank is unlikely to be willing to lend you much.
After considering the pros and cons of each situation, it is still a personal choice. If you are not prepared for the responsibility of owning your own home, or if your lifestyle would be more suitable for renting, then this is the right decision for you. However, financially it is a better option if you can buy your own home. You are increasing your personal value, rather than the owner’s.
If you have other reasons for making the decision you have, that’s great. But make sure you have made up your mind, rather than being carried away by the situation you are in. You may find that you want to change your situation, and if not, you have at least decided what is best for you!