Are you a better candidate to rent or buy a home?

Are you torn between the decision to rent or buy your next home? Many Canadians feel uncertain when they need to make the choice between homeownership and renting, especially first-time buyers. It can be hard to know when the timing is right, and whether you are prepared to enter the housing market. If this sounds like you, there are a few key areas to think about that will help you make your decision! Here’s what you should take the time to carefully consider.

Consider your savings and budget

Right off the bat, one of the first things you will want to think about when deciding between buying and renting is your finances. As two different housing options, these obviously have different prices and payment structures. Buying and renting both include monthly fees, either for mortgage payments or rent costs. Depending on where you live, these prices may be comparable to one another. However, the difference is what that money goes towards. As a home owner, your payments help you build equity in your home as you pay off your mortgage. As a renter, you are just paying to use the space, without any responsibilities or benefits tied to ownership. 

A home owner’s monthly costs are also less predictable. Maintenance, repairs, and unexpected expenses are more likely to pop up. Home owners need to budget for these expenses, whereas renters have a much clearer cost breakdown. 

Finally, you should consider your current savings. If you are interested in buying a home, you need to have a down payment saved up. As a large upfront cost that pays for five to 20 per cent of a home’s purchase price, most people spend years saving up this payment. Many people have tax-free savings accounts or first home savings accounts that they use to build their down payments. Whether or not you have a plan set up to save a down payment will impact your options to rent or buy.

Think about your long-term plans

This is an essential part of deciding to rent or buy your next home. Your housing plans should consider your vision for the future, not just your situation today. For example, a person who rents likely has a 12-month or month-to-month agreement in place. They have a fair amount of flexibility to pack up and move on if they decide their rental home no longer fits their lifestyle. However, home owners should be ready to commit to one property for several years. The time, money, and effort involved in buying a home should not go to waste if you only plan to stay in one spot for a year or two. Home owners should be prepared to commit to the area long-term, whereas renters have more freedom to move around.

Similarly, your needs and wants as a buyer will differ from those of a renter. Renters are more likely to accept certain pain points in their homes, such as thin walls or old flooring, for example. This is because the house is not theirs, and many renters plan to buy their own property one day. Home owners, though, often have more specific living preferences. After putting in the time and money to buy a home, many home owners want to make the effort to customize or improve the space. When you look ahead to the future, what do you see for yourself?

Understand the commitment to homeownership

Another way to help decide if you should buy or rent is to think about the commitment and responsibilities involved in owning a house. We mentioned this above, but all maintenance, repairs, replacements, etc. fall on you to arrange and pay for. You must be prepared to give your house the treatment it needs whenever an issue arises that threatens its functionality. Of course, as a renter, these thoughts and payments will fall onto your landlord. 

Apart from the cost of maintenance, there is also the time and effort involved with a home’s upkeep. As a home owner, you are responsible for keeping it clean, safe, and well-maintained. Renters also have these responsibilities, but to a lesser extent. Many houses are larger than rental properties, which means this is an added responsibility. Be sure you are prepared to put in the time and effort required to maintain a house if you choose to buy!

Evaluate your desires and feelings of readiness

Finally, you need to think about what you truly want. Many people feel pressured to buy a house because of their age, or what their friends and family say is right. At the end of the day, the only opinion that matters is your own. If you feel financially ready to own a home, and you are prepared for the responsibilities associated with it, then this is likely a good time to jump into the market! If you are feeling unsure of your long-term plans, however, or your financial preparedness, there is no harm in holding off until you are ready. It is much better to buy a home when the timing is right for you, no matter when that is!

If you are feeling stuck between the decision to rent or buy, you can always call on your local mortgage broker to help you out! We can work together to evaluate your current situation as well as your finances, goals, and plans for the future. We can create a roadmap to homeownership if that is what you are hoping to accomplish. Plus, we can walk you through the different types of mortgage products out there today, including the ones that are best suited for you. For anyone considering taking the leap into homeownership, it’s never too early to get started.

If you have any questions about your mortgage, give us a call at Centum Home Lenders! You can reach us at 506-854-6847, or get in touch with us here.