Rent vs Buy – Should You Rent or Buy a House? (a comprehensive guide)

Rent vs Buy - Should You Rent or Buy a House

In this session, you’ll learn everything you need to know before deciding to rent or buy a home. Nothing is left out as we dive into the financial and lifestyle factors that you need consider before making the big decision.

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Key Points from the Episode:

The Advantages of Renting:

  • The ability to “sample” the city
    • How’s the commute?
    • How’s the crime?
    • How are you handling being away from family and/or friends? (if moving away)
  • The ability to move easily
    • Lower cost
    • Lower stress
  • Don’t need to worry about interest rates
  • The commute might be shorter (ex. living in the city centre by your job instead of the suburbs)
  • If you’re investing the money you’re saving in broad market ETFs or index funds, you are much more diversified than someone investing all their money in their home.
  • Typically your monthly cash outflow is lower than if you owned a home with a mortgage, giving you some financial stability should disaster strike like a job less or an injury that forces you out of work. Keep in mind that if you were mortgage free these month-to-month expenses would be even lower.
  • No lawyer fees, land transfer taxes, and mortgage insurance fees that you must deal with when buying a house.
  • Don’t have to worry about saving for a downpayment.

The Advantages of Buying:

  • Can pay-off mortgage and live “rent-free”
  • With a paid off mortgage, your financial security skyrockets due to a drastically lower ongoing cost of living
  • Mortgage freedom equals lifestyle freedom. Certain lifestyle choices become possible such as working part-time instead of full-time, staying home with children, starting a business, and/or early retirement.
  • Equity build-up
  • No tax on the capital gains (increase in property value) once you sell the property
  • Freedom to do what you want with your home (no rules and restrictions from the landlord). Aside: Remember that with condominiums certain rules might still exist so be sure to request these before purchasing.
  • Can’t be forced to move
  • Can do forced appreciation
  • Don’t need to worry about rent control
  • Can be a relatively safe investments (assuming you stay on top of surrounding area)
  • Have to ability to refinance and purchase investment properties with greater ease

Links and Resources Mentioned in this Episode:

Your Rights as a Renter

As mentioned in the episode, the rental laws and your rights as a tenant actually vary from province to province. Before renting, you should definitely reviews a summary of these laws to ensure you know your rights such as the rules for getting out of the lease, rent control, the deposits that the landlord can ask for, etc. Some landlords don’t know or care about these laws and so to protect yourself, you should definitely ensure that you are familiar with the rules so that nobody takes advantage of you.

Here is the link where you can learn about the details of your rights no matter what province you are going to be living in:
Official Provincial and Territorial Fact Sheets for Renters.

Rent vs Buy Calculator

Below is the link to the best rent vs buy calculator for Canadians that I could find. If you aren’t sure what to enter into some of the fields just let me know in the comments section down below and I will gladly help you.

Ultimately, the calculator will tell you how many years you have to hold the house for before it becomes the financially correct decision (instead of renting and investing the money that you’re saving).

I give a thorough review of the calculator and mention the things to be careful of in the podcast episode (see above).

Here is the link: Rent vs Buy Calculator

Keep in mind that the calculator doesn’t take into account your tax situation so if you think that could alter your numbers significantly, it’s a good idea to seek help from a taxation professional.

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