When it comes to where you live there are two main options on how to come about acquiring a place to live, you can rent or you can own. While each tends to have their own benefits and issues more Canadians tend to gravitate towards homeownership rather than renting. Per the 2016 Canadian Census 67.8% of the population who answered owns their home as opposed to renting. This is very positive as homeownership has many benefits. But first let’s balance the pros and cons of renting and then get into the pros and cons of owning.
Landlord is in charge of maintenance, this is probably the biggest pro of renting just for the simple fact that the renter does not have to worry about any extra maintenance costs that come with owning the home. Broken sink? The landlord is in charge of the cost to repair it. Need shingles replaced? Landlord issue, think of any sort of normal home maintenance and that is no longer the concern of the renter.
Yearly and initial cost is lower than owning. For renting your only initial costs are your first and last month’s rent. The average cost to rent a 3 bedroom home in Ontario is $1,406/month, so for first and last your initial cost is $2,812. Now multiply the $1,406 monthly cost by 12 and that gives you $16,872 and if you rent you need to be insured and renters insurance is on average $15.12/month so multiply that by 12. That gives you a total of $181.44 for the year so $181.44+$16,872=$17,053.44 as the estimated yearly cost of renting a 3 bedroom home in Ontario. Now let’s compare this to the initial and yearly cost of homeownership. Per CREA (Canadian Real Estate Association) the average home in Ontario sold for $517,379. With a down payment of $26,737.90 and a closing cost of $7,760.69 this brings the initial cost of purchasing a home up to $34,498.59. Now let’s look at the yearly cost, a mortgage is $2,058/month, mortgage insurance is $65.45/month and property tax $296.62/month making the yearly cost a grand total of $29,040.36. The breakdown of all these cost were found using https://www.ratesupermarket.ca/blog/cost-of-buying-vs-renting-in-ontario-infographic/.
Finally you are a little more flexible to move when you rent vs. owning. When you own a home you have to list it for sale and wait for someone to come along and purchase it. But if you rent all you need to do is make sure your year lease is up and even if it isn’t most places will let you leave if you give them 60 days notice or if you find someone to take over your lease or “sublet”.
A big con of renting is that you can’t make alterations without the landlords consent. This makes sense because you do not own the home thus you need the homeowners permission before doing any tasks, however with that in mind most landlords are pretty accommodating unless you are doing something that could potentially cause damage to the home or lower the value.
Pets! A lot of rental units have a no pet policy so if you have a furry friend it can limit your options on places that will be willing to accommodate you and said pet. Now some say there are work arounds to this rule but it can be a hassle so often it’s best to just finds someone who doesn’t mind a cat or a dog. It tends to be when you have multiple of either or both that it turns off landlords.
Finally you get no return on your investment! Earlier I mentioned that the initial cost of renting is cheaper and while this is true you lose all that money. Whereas when you purchase a house and go to sell you are getting most (and in most cases more) of your money back! This can either go into your next home or retirement.
It’s YOURS! Kick your feet up have a glass of wine, do the dishes tomorrow who cares it’s your place! It’s nice having somewhere to call your own, especially after a rough day at work.
Don’t need permission for alterations. Yes it’s your home do what you want! You don’t need anyone’s permission (unless it’s something that requires a permit) but go ahead and do any small fixes or changes you want. It lets you create a look or an identity that you want your house to represent, on the inside and out
It’s the biggest investment of your life. Owning a home sets you up for retirement, and helps build your financial portfolio for other large (or small) investments. Buying a home also sets you up to buy a bigger home; it’s much easier to buy a bigger house if you are in the middle of selling your previous house.
Big financial obligation. This one is pretty obvious if you don’t have the money or job security you shouldn’t buy a house, but if you do, why haven’t you?
Maintenance/Upkeep. If you aren’t a handy person doing routine maintenance can seem like a nightmare and if you don’t do it your house could lose a lot of value when or if you ever decide to sell. Even though the task may seem daunting DO IT! Your home will thank you and you could help potentially avoid a major fix by completing minor ones.
At the end of the day renting and owning both have their pros and cons but it is huge benefit if you can get yourself a home just to get your financial portfolio started and help you cash in when you are ready for retirement. Always remember though you don’t need to go through the process of finding a home alone, there are plenty of helpful agents who are local real estate experts and are more than willing to give you their time and effort to helping you find your way home!