Rent or own? With house prices and rents both heading skyward, the answer to this question is harder to answer than ever before, no matter your situation.
George and Tina, for instance, have been renting an apartment for several years, and have recently had their first child. They’ve always had home ownership as a goal, but the arrival of their child has put the decision front and centre. There are important pros and cons for them to consider when making this decision.
Where they’re at right now
For George, renting seems appealing as a financially stable decision, at least in the short term. Their rent may increase over time, but they will not have to pay additional costs that may vary over the years or month-to-month, such as maintenance, taxes, and insurance.
Furthermore, while homeownership may be a long-term investment, it is an illiquid asset. The money they may make down the line is not available at any given time, and the savings spent on a down payment could be used for investments in an RRSP instead.
Renting may also be the right choice for them if flexibility is important. In the event that they need to relocate for any reason, it’s easier to move out of an apartment than it is to sell a house.
Renting may also provide them with greater neighbourhood choice, as they may be able to rent in an area they could otherwise not afford.
Five reasons why homeownership makes sense
Renting is by definition a temporary agreement. There is always the possibility that a lease may not be renewed, or that a landlord may make undesirable changes to a property.
Many of George’s fears around homeownership centre on the financial responsibility of a mortgage. However, it would be wise to consider the upside.
Here are five reasons why home ownership makes sense for George and Tina, and could make sense for you.
- Home ownership provides stability. For George and Tina, or you, a house is an investment in the future, both in terms of financial and personal stability. For the majority of Canadians, their home is their most important asset, and one that has only increased in value over time.
- Home ownership offers tax breaks specifically for homeowners. As first-time homeowners, for instance, George and Tina are eligible for a first-time homebuyer credit. And the capital gain on their property will be completely tax-free when they sell it.
- Home ownership builds equity. Rather than paying monthly rent to a landlord, they would be building equity every month.
- Home ownership offers creative control and the opportunity to increase long-term value. This is a major advantage that they would see every day, rather than in the long-term. Beyond just choosing their kitchen cabinets, renovations would be an investment in the long-term value of their home and their future.
Find out how SafeBridge can help you take the plunge into homeownership: contact us today.