To those of us committed to the business of real estate, the preferential route seems all too obvious.
To buy is to build equity in your future.
To rent is a virtual license to pour hard earned money down the drain.
To buy is to see gains surpass those in a good stock market portfolio during rockier times on Wall Street.
To rent is to enable landlords to own and often prosper.
Do you sense a bit of a clash of dynamics in that last scenario? Financial experts say this is a prime time for first time buyers and investors alike. With continuing record low mortgage rates and banks virtually giving money away, the ‘Rent vs. Buy’ question seems all but moot. So let’s take a look at both sides of the equation that potential buyers are considering:
OWNING
Pros
- Your mortgage payments are gradually building equity in your property
- Over time market appreciation in your property is like ‘found money’ and as a principle residence, a tax free gain upon the sale.
- Falling mortgage rates in a variable rate mortgage applies more of your payment to the principal, building equity faster
- You are ‘king’ or ‘queen’ of the castle, free to make your home uniquely yours
- Financial benefit escalates with long term residency particularly when you become mortgage-free
- Your home can become a key component of your retirement plan
Cons
- Maintenance costs are your responsibility
RENTING
Pros
- Financial benefit favours frequent movers not interested in ‘setting down roots’
- Maintenance costs are your landlord’s responsibility
Cons
- Your rental payments are building your landlord’s retirement plan not yours
- Your rent will increase over time within certain guidelines
- Falling mortgage rates make no difference in your rental payment
- You must respect the limitations or guidelines of your landlord or strata council
Certainly we can appreciate that there are those, who by choice or by circumstance will never enter the world of home ownership. To many others, it is a privilege to attain a position of ‘pride of ownership’ and to invest in an asset that will ensure them a better lifestyle into their retirement years.
Please contact us if you would like an interactive spreadsheet that shows the dramatic differences in future net worth between renting versus purchasing a home.