Rent vs. Buy: Why Buying a Home Generally Wins

Buy or Rent a Home?

“Should I buy or rent a home?” — this is one of the most common questions that people ask. With a stable economy and belligerent housing market, many Canadians are thinking about realizing their dream of owning a home. However, the thought of committing to a mortgage, coupled with the uncertainty about a speculative bubble has made many Canadians think whether renting is the easier and more affordable option.

When it comes to the question of buying or renting a home, there’s no single, universal answer. Every individual’s financial state and goals are different — some are better off buying a home, while renting works great for some. There are a number of factors that you need to take into account to decide which option is better. 

Advantages of Owning a Home

Independence & Privacy

Buying a home offers you a greater degree of independence and privacy. People living in detached homes have the freedom to color their interiors and exteriors in their favorite colors. They also have the freedom to make any renovations or changes to their homes.

Pride of Home Ownership & Sense of Community

For a lot of people, owning a home is about realizing their dream of having a place which they can call their own. Becoming the owner of a home is associated with feelings of pride and honor. Becoming a home owner also gives a sense of community well-being and people become more actively involved with the issues concerning their locality/region.

Builds Equity

The monthly payments you make towards your mortgage helps you build equity in your home. The initial monthly payments go towards paying the interest, but over a period of time, you start paying the ‘principal’ and build equity in your home. This helps provide stability and security for your family.

Tax Deductions

Buying a home gives you an opportunity of deducting mortgage interest and property taxes from your income. Many homeowners benefit from these tax deductions as initially, most of the payments go towards paying the interests.

Stable Monthly Payments

When buying a home, you have the option of choosing a fixed-rate mortgage, which means your monthly payments will remain same over the term of the loan. This helps homebuyers plan their monthly budget in an organized way. People who rent a home have to pay a higher amount after a period of time (depending on the contract/lease). 

Increase in Borrowing Power

As you build equity in your home, new borrowing avenues open up for you in the form of HELOC and other loans. These loans can be used for any renovations/repairs or funding your child’s education.

Disadvantages of Owning a Home

Long-Term Financial Commitment

Most mortgages come with a 15+ years of amortization period, which means you have to make those monthly mortgage payments for a really long time. Some people feel as if they are chained when they think of committing to such a long-term loan.

Maintenance Costs & Property Taxes

In addition to making the monthly payments, homeowners also need to pay for maintenance costs and property taxes. This can put a burden on your budget or force you to take more credit in case you haven’t planned for it.

Decreased Mobility

Renters have the benefit of moving quickly from one job to another, in case of a job transfer, unemployment, etc. Homeowners on the other hand need to sell or rent out their property before they make the move. This involves a lot of searching around and legal work which can take a lot of time.

Buying Home Wins

Although home ownership and renting both have their pros and cons, the former is a long-term, stable approach, while the latter is usually a short-term fix. Since times immemorial, humans have shown an inherent tendency to settle at one place and develop a sense of community and bonding with their neighbors. Even from a financial perspective, owning a home is more beneficial than renting a place, especially if you plan to stay put for more than 5 years. The feeling of pride and the joy it brings it to your family cannot be measured on any mortgage calculator. We would like to conclude this article with this beautiful quote by Suze Orman — American author and financial advisor.

 "Owning a home is a keystone of wealth, both financial affluence and emotional security."