February 24, 2022

To rent or to buy: a closer look

Is it better to rent or to buy a home? It’s a fair question considering the current cost of rents. However, the answer is more complicated than you might think.

Renting a condo may seem like the better option when you think about the selling price of condos. Yet, there are certain advantages to buying a condo. Renting a house may likewise seem more affordable, nevertheless, there are sound reasons to buy.

While market conditions will naturally affect your calculations, the basic elements to consider when making a decision always remain the same. Here’s what you need to know before deciding.

Advantages of renting

Choosing to remain a tenant can be an excellent decision in different situations:

  • You don’t have enough savings to put down a down payment plus pay for the initial costs of purchasing a home.
  • You have a career that requires you to relocate often.
  • You want to live in a large urban centre but cannot afford the high house prices or at least, the prices in the more desirable neighbourhoods.

Renting an apartment, condo or house lets you enjoy your lifestyle with no long-term commitment. In addition, you know that rents will remain relatively stable since rent increases are regulated by the Régie du logement.

Of course, buying a house or condo does not necessarily mean that you are locked into a long-term commitment. Even so, the process is more complicated and subject to greater constraints and costs.

Advantages of buying

The main disadvantage of renting is that you pay a large amount each month in rent. All that money goes into the owner’s pockets.

When you buy a property, part of what you pay each month for housing goes into your pocket. Of course, you have to repay your mortgage along with interest to the bank. However, a portion of the monthly payment is used to repay the capital, which means that you are accumulating savings through your property.

Another advantage: buying a house is in fact a real estate investment. Over time, your home, condo or rental property will increase in value. When you are ready to sell it, you profit from the capital gains generated by your investment, in addition to the capital you have already repaid.

Finally, owning a property is the best way to really feel at home. You can furnish your home as you wish and change it as your needs evolve.

What to expect when buying

Buying a property is generally very advantageous if you have the money required.

A 5% initial down payment is required if the selling price is less than $500,000. If the property’s value is above $500,000, the down payment is 5% for the first $500,000, and 10% for the portion above this amount up to one million dollars, the maximum amount insurable by the Canada Mortgage and Housing Corporation (CMHC). If your down payment is 20% or more, you do not have to pay for CMHC insurance. 

In addition to the down payment, you need to pay for the costs associated with buying a house, such as:

  • property transfer tax (welcome tax)
  • inspection fees
  • notary fees
  • moving costs, etc.

Not to mention that you also have to furnish your new home and assume various recurring expenses such as heating, maintenance, etc.

To rent or to buy: the verdict

If you do the math, your monthly mortgage payments are probably not that much higher than what you are currently paying for rent. However, being a homeowner entails multiple expenses since you have to maintain your home, pay condo fees, pay municipal and school taxes, etc.

If you have the income and savings, buying a house or a condo is advantageous. Before starting the home-buying process, take the time to analyze your needs. A real estate broker will help you understand what is important to you today and in the future. Working with a real estate broker will also help you make sound decisions!

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