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The 5 Long-term Implications of Renting vs. Owning

calendarMarch 8, 2019

peopleThe Mortgage Advisors

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Trying to figure out if you should continue to rent or buy a home instead? We’ll show you what the long-term implications of renting vs. owning are so you can make a better-informed decision for your budget and lifestyle.  

Renting Isn’t Always Better For Your Budget

Unless you can find a landlord who will keep your rental rate at the same price year to year, in the long term, you will end up spending more than someone with a mortgage. Why? Because you can get a fixed rate mortgage that locks you into a particular rate over time. With renting, most cities allow landlords to raise their rental rates every year based on the rent increase guidelines. Some areas even allow owners of newer buildings and condos to increase rent as they please. So one year you could be paying $1500 and the next $1800. Unless your rent is well below the average mortgage, buying is a better option.  

Home Ownership Forces You To Save

Putting money into your mortgage each month forces you to save for your future instead of just spending it on material things. Unless you’re putting away money into investments that will yield a significant return when renting, you will have less at the end of the day when compared to an owner whose property, equity and value, appreciates over time while the mortgage decreases.  

Owning Presents Secondary Income Options

Most landlords prohibit renting or subletting units without their approval. That means your dream of renting out your rental on Airbnb to make some extra money may be squashed. However, if you own your home, you can easily rent out any room in your house or even a basement apartment to make extra income.  

Renting Offers Less Security

Renters always risk being evicted if the market rises quickly and the landlord wants to make more income, or if they suddenly decide to sell the home. When you own your home, you have complete security as long as you pay the mortgage.  

Interest Rate Rises Could Prevent You From Buying

There’s a reason why many investors have moved fast to get into the rising Canadian markets. As interest rates rise it can be more difficult to qualify at higher interest rates and stress tests required. All you need is 5% saved plus closing costs to get you started into the housing market. Buying a home is not only finding a place to live but an investment in your personal wealth. Buying when rates are low helps you build equity faster.   If at any time you can afford to get into the market, you should always consider buying over renting.   If you’re not sure if buying or renting is best for you, talk to one of our real estate experts at the Mortgage Advisors. We’ll help you understand your options and what’s best for you.
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