By: Belinda Lelli

Should I Buy or Rent?

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To buy or not to buy, that is the age-old question. While there may not be a word one answer that covers all situations, there is an answer for everyone.

 

Renting vs Buying is a personal choice, but there are a few financial aspects of this decision that should be considered regardless of a pre-existing stance.

 

  1. Do you have a downpayment available?

    1. This is really the easiest way to strike buying a property off your list. CMHC requires a minimum 5% down payment for a purchase of less than $500,000. For any purchase above $500,000, a 10% down payment is required on the portion exceeeding $500,000. Keep in mind, if you put down less than 25% of the purchase price, you will be required to pay mortgage insurance which can add thousands of dollars to your mortgage. A general rule to follow, if you have the downpayment available, put it against the purchase price to lower your monthly payments and insurance premiums.

  2. Are you looking to stay in the home long term?

    1. Settling down into your dream home? You should probably buy. The average price of a GTA home increased over 16% from last year according to the Toronto Real Estate Board, proving that real estate is a smart and safe investment.  

    2. Know that you’ll need to move for work or school in the next few years? Renting allows you greater flexibility and less sunk costs (land transfer fees, lawyer fees, real estate agent commissions, etc.) Even with the increase of home value, you will see your profits diminish if you move within a year or two of purchasing.

  3. Are you looking to make money?

    1. While a profit is not guaranteed with home ownership, paying rent every month is certainly not going to increase your networth. Purchasing a property as your primary residence means that any increase in value becomes non-taxable profit for you to keep when you go to sell your home.

 

Another factor that you should take into consideration is security of tenure and autonomy in that your landlord has ultimate control over the property, changes to the property need to be approved, and any upgrades made will ultimately benefit the landlord financially, not yourself. On the other hand, not having to worry about replacing a roof or leaky pipes while renting is a huge benefit and provides a more worry-free lifestyle.


 

A great, financial based resource of buying vs renting can be found in the link below: