What is the meaning of life? Destiny or free will? Happiness or growth? To rent or to buy?
Okay, that last one may not be one of life’s big philosophical questions, but it is one of the more important financial decisions you’ll make in your lifetime. And while owning your own home was once the ultimate dream for many Canadians, home ownership has become less and less feasible for a growing number of Canadians, so more are naturally opting to rent. In fact, just half of millennials at the average age of 30 own their own homes versus 55 percent of baby boomers at that same age in the early 1980s.
To help you answer the "rent or buy" question, we’ve highlighted three benefits of both below. Ultimately, it comes down to your personal lifestyle and financial situation—because what one person might consider a positive, another may consider a negative.
Top 3 Benefits of Buying a Home
Owning your own home obviously has its perks. For one, it's a investment...for you. No more throwing your money down the drain, month after month in rent. Secondly, many people can earn a very decent income just by renting out their property. You also have the option of selling your home once you retire to help fund your golden years. Plus, owning your own home gives you a level of freedom where you can make it exactly they way you want it, provided you have the money to do it.
#1 Buying a home is an investment in equity
Real estate is one of the safest investments you can make, and unlike an intangible stock, owning a home is an investment that you actually live in—this gives many people a sense of security. Plus, if you rent, you're helping someone else pay their mortgage versus paying your own. And as you make payments on your own mortgage, you’re building equity. Equity offers financial freedom in that you can borrow against it in order to make home improvements, pay for your child’s education, or even start your own business.
#2 You can make it your own and save money
Unless your home is part of a deed-restricted community that imposes rules, your home is your castle and you can do with it as you please. Need some shade? Grow a maple! Extra space in the garage? Make it a man cave! Getting over a break up? Paint your kitchen! And that’s just landscaping and aesthetics. Buying a home also allows you to make upgrades that can save you money. For example, you can make energy-efficient improvements, like adding extra insulation in your attic or switching to LEDs. Or you can go super green with upgrades, like a installing a programmable thermostat or even look into installing solar panels. Many of the improvements you make can also increase the value of your home, providing a handsome profit if and when you ever decide to sell.
#3 It gives you a source of pride and privacy
Remember how proud you were when you finally paid off your car or truck, or started your side business? Now multiply that sense of accomplishment by 100! Of course you’ll likely be borrowing for many years, but once you own that home, even if it’s just a small starter or a little studio, it can be such a great feeling! For many, it’s a way to say, “I’ve made it—I have arrived!” Owning also offers you complete privacy. No longer do you have to worry about a nosy homeowner or landlord checking up on you and making demands.
Top 3 Benefits of Renting a Home
Personally, I'm a renter at heart because it fits my lifestyle. Renting means more freedom and flexibility, not having to do repairs around the home myself, and having enough disposable income to do the things I love, like travel, while diversifying my investments. Of course this might change in the future, but sometimes renting can be the smarter choice. It all depends on your long-term goals and lifestyle.
#1 Renting gives you freedom and flexibility
Selling a home takes time and money, which can make it inconvenient to move. (And making some homeowners feel trapped.) But as a renter, moving is just a matter of giving one month's notice, packing up, and hitting the road. This flexibility makes it easier to take advantage of new or better job opportunities, whether it’s across town, in a different province, or even a different country. And in case of a job loss (because anything can happen) your job search isn’t confined to just one area. You're free to move about the country, so to speak. You also have more flexibility as a renter if you want to live downtown or near your work, which is often a top priority for younger people. While it's becoming less affordable to purchase a home in the city, you can often find a comfortable, safe place to rent. The rent might be high, but it’s doable, unlike buying.
#2 Renting is hands-off and hassle-free
You’ve got the DIYers of the world who love to work around the house, in the garage, or in the garden. And then you have those people (myself included) who don’t want to be bothered or are too busy to be bothered. For us, renting is a convenience. If the plumbing backs up, call the landlord. If the roof leaks, call the landlord. Does an appliance need to be replaced? You guessed it—call the landlord. Of course, some landlords aren’t always the most responsive people on the planet, which is another factor to consider.
#3 Renting lets you to diversify your investments
Owning a home is generally a great long-term investment, but between mortgage payments, property taxes, home repairs and renovations, it can also take up a huge chunk of your income, tying up your wealth in one single asset. And if there’s an economic downturn or slump, or zoning laws negatively impact you, your net worth takes a hit. As a renter, you’re likely to have more money on hand in the short-term to diversify your portfolio of investments, including stocks, bonds, GICs and real estate investment trusts.
Need help rebuilding your credit? We can help!
If you need help rebuilding your credit so you can qualify for a mortgage, Credit Canada offers free credit building counselling sessions. During these sessions, one of our credit counsellors can pull your credit report and score and tell you exactly what you need to do to build your credit.
Like many of life’s big decisions, there’s no one answer that’s right for everyone. This can be especially true when it comes to deciding whether to rent or buy. There are a whole host of factors to consider, like your current financial situation, future financial goals, lifestyle, career, children, age, and much more. If you need help determining if your budget would be better off renting versus buying, our credit counsellors can take a look at your monthly income, debt and expenses and tell you what your options are. Just call 1.800.267.2272 to book. All of our counselling is 100% free, confidential, non-judgmental and there's no obligation.