In this article, I’d like to go through the benefits of renting versus buying your home. Buying a home is often the dream of many people, and while it can mean more financial stability, it isn’t always the case. The real answer will depend on factors such as, your situation, the economic conditions of where you live, interest rates, real estate market trends, just to name a few.
Instead of listing every single pro and con, I’ve decided to focus only on the benefits of each and list what I feel is a selling point for each. Consider if these factors are inline with your status. And remember, just because you’re currently stock in a yearlong lease or a 5-year mortgage term, doesn’t mean you can’t plan for your future.
Benefits of Renting:
If you buy, on top of the mortgage you’ll have to pay for repairs, maintenance costs, homeowner’s insurance, property taxes and more which will likely end up being more expensive on a monthly basis if we look strictly at how much is coming out of your pocket.
When you rent, you won’t have to deal with such problems. You pay your rent and won’t have to worry about a rise or fall of property values.
Benefits of Owning:
Over the long run, as you pay down your mortgage real estate prices have proven to rise. Even when there are downturns if you hold your home long enough you’ll likely come out on top.
Rent vs. Buy Calculation
Now that we’ve talked about some of the benefits for each side, let’s do a mock example so that you’re able to determine if renting or buying makes more sense for your personal situation. If you’re considering buying you I’m assuming in this example that you have money saved up for your down payment.
Strata fees can vary depending on where you live. The best way to figure this out is to find comparable properties and it will tell you. You can also do a market average per square foot/meter to see if the place you are looking at is expensive. The obvious thing to note is that the more amenities a building includes and the older the building, the higher the strata fee.
And the number should come out to $1,511.13. This number includes both property taxes and insurance. It doesn’t include maintenance and repairs or strata fees. So if we pretend that strata fees are $200 then your monthly payment will be $1,711.13, $211.13 more than renting for a comparable property. However, you will be building equity in your home with each monthly payment.
Every mortgage payment that you make, the principal amount will eat into your overall mortgage amount outstanding, which means that the more you pay the less you will owe to your mortgage lender.
NY Times Buy vs. Rent Calculator: This is a great tool that NY Times published and let’s you easily compare renting and buying from a variety of angles.
RBC Mortgage Calculator: Another mortgage calculator that I like to use, I find RBC’s (a Canadian bank) mortgage calculator the easiest to use. I have no affiliation with this bank whatsoever.