Owning your own home has long been seen as a barometer for success in Canada. Today, however, more and more Canadians are renting instead of buying, and the reason might surprise you!
Traditional wisdom suggests that owning your own home is a better financial option than renting. So why are so many Canadians deciding to rent instead of buy?
Owning a home can be a big comfort, but it can also leave you with a bit less freedom. If you do decide to move or travel then you’ll have to either sell or rent – leaving you at the mercy of the market.
Selling a house, as anyone who has had the pleasure of the experience will tell you, can be a headache. Renting on the other hand, gives you the freedom to pull up stakes without all the hassle.
A safer investment
There was a time when real estate was seen as a perfectly safe investment. After the US housing bubble burst in 2007, this perception has been changed somewhat. Renting will help insulate you from a future housing collapse. Instead of paying off an $800 000 mortgage on a house that is now worth $400 000, a renter would see their monthly rent drop!
In addition to the initial down payment, taxes on seemingly everything, real estate agent fees, interest on mortgage payments, condo or homeowner association fees and lawyer fees, there are other expenses to owning a house. Leaky pipes, stained carpets, ageing roofs and any one of the million other things that might go wrong can all make a big dent in your savings.
Renting removes the extra expenses associated with home-ownership. All the above expenses can eat away at your investment. Meanwhile renting removes much of the hassle and your money can grow in a relatively safe investment like gold or whatever else you choose to build your portfolio.
Buying a house or buying a mortgage?
It is important to look at buying a home without rose-tinted glasses. It is a massive investment and in purely financial terms it can seem ridiculous. After all, you aren’t buying a house, you are buying a mortgage. You are borrowing money to buy a long term investment. Would you ever consider borrowing $300 000 to play the stock market? Then why borrow say 400% more than you have to buy a house?
It is important to remember that whenever you expend a large amount of money on an investment – and a home must be thought of as an investment – there are also opportunity costs. That is to say that rather than having your money tied up in a long term mortgage it might be better to invest it in something else.
To Rent or to Buy, That is the Question
Renting isn’t just for young professionals and students. More and more established professionals and retirees are enjoying their success by travelling. Owning a home can sometimes be a burden compared to the freedom of renting.
Rent or buy has become a real conundrum and don’t be surprised to find more and more people (of all age brackets) choosing to rent and invest.
Some may argue that owning a house has a value that can’t be calculated in dollars and cents. Of course anyone who has rented knows that buying a house doesn’t make it a home. It is the people, the love and the memories that make a house a home. That being said, renting may not be for everyone, just like buying isn’t. Talk to an expert and decide what’s right for you before committing to rent or buy a house.
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