The renting vs. buying debate has been an on-going topic for years. While some people argue that renting is a waste of money, others claim that it’s actually a lot cheaper than buying. So, who is right?
The correct answer is that it really depends on your individual situation and the general state of the housing market. For some, renting is the better choice and for others, buying makes a lot more sense.
Renting is a good option for multiple reasons. If you are currently renting and one of the following categories is true, then it might be a better idea to continue:
If you move often or if you’re planning to relocate in the near future, then renting is your best option.
There are various upfront costs when buying a house such as the down-payment amount, inspection fees, insurance costs, and more. If you don’t have enough cash saved-up to pay off all these expenses, then it is better to continue renting until you are able to put-away some more savings.
When you have high-interest debt, it’s always a better idea to pay it off before you take out another loan. And, if paying it off leaves you on a tight budget, then you might not be able to afford the monthly costs of homeownership such as maintenance, condo fee’s and more. If this is the case, renting is possibly the better choice for now.
High interest rates on mortgage loans means that your monthly mortgage payments will rise. Ideally, the lower the rate, the better it is going to be on your pocket. If the rates are currently too high, then it may be a better choice to wait and see if either the houses will eventually go down in value or if the rates will ultimately deflate.
When there is high demand for houses but a limited supply, prices start to rise until they are above sustainable levels. If the housing market is currently over-priced, you might end up overpaying for a home. Getting an appraisal is one way to get validation that the home is worth its asking price. However, you may also prefer to wait until the housing market prices go down.
Now that we’ve covered when to rent, let’s look at the flipside of the above scenarios to see when it would be a good idea to buy:
If you’re ready to put down roots and are committed to staying in the same place for 5 or more years, then buying seems like the right choice.
If you have enough cash saved-up to pay off all the upfront costs, then you are in a good position to buy.
If you are financially stable with low or no debt, then you are likely able to afford the monthly costs of homeownership which means that buying a home could be a sound decision for you.
Low interest rates on mortgage loans means that your monthly mortgage payments will decrease which is really beneficial for you money-wise. If the rates are currently low, then it’s a really good time to buy.
When there is low demand for houses and a high supply, prices start to drop. If the housing market is currently under-valued, you could find an amazing home at a really good price which means that you could also turn a profit from it once the housing market picks up again. If this is the case, it’s a good time to buy.
If you are still unsure whether or not to rent or buy, consult the advice of a mortgage broker to help you better understand which option would be the right one for you. And, if you think that you are ready to buy, use our online affordability calculator to find out if you are eligible for an instant mortgage pre-approval!