Most of us have been told that it’s better to buy than to rent a home. Rent money tumbles down a massive black hole while mortgage payments build equity and financial security. Owning a home offers greater stability while renters outside of rent-controlled areas may find themselves forced to pay ever increasing rents—or the increases may eventually force them out of their beloved rental property.
But times have changed. The cost of real estate in major cities has skyrocketed to exorbitant prices. Contrary to popular belief, paying rent is also not akin to “throwing your money away.”
All-in-all, there are advantages to both, so let’s dive in and first look at the benefits of purchasing a home.
The Argument for Buying a Home
Building equity is the greatest benefit of home ownership for most. Paying a mortgage is like having a forced savings account—that money is there and accessible to you if you need it in the future.
If you’re able to afford a home in a neighbourhood you like and envision yourself living in for the next several years, buying a home also makes a lot of sense. You can start putting down roots while giving yourself and your family greater sense of security.
Buying also makes sense if you’re prepared to make the financial sacrifices which come with owning a home. Apart from larger expenses like replacing the roof and the fence, weekends often consist of making trips to a home repair store to tackle the small repairs needed to keep your home safe and functional.
The Argument for Renting a Home
Renting comes with greater freedom. With as little as thirty-days notice in some cases, renters can advise their landlords that they’ll be taking off to live elsewhere. This makes renting an ideal option for those who are in a temporary work situation or who want to “live in and see” what it’s like to live in a particular community.
More often than not, renting a home is a lot more affordable than owning a home. Apart from paying rent and for the utilities, your finances are then free to do with as you wish.
Most people will tell you that buying a home is a great investment, which is can be if you plan on owning that property for a decade or more. But remember that there is no guarantee in the value of a home increasing (in fact, many home owners break even or lose money when selling their homes!).
Having that extra income as a renter means being able to make other smarter and more financially-beneficial investments. Lucrative opportunities like peer-to-peer (P2P) lending are accessible and can deliver far greater returns without the pressure of owning and maintaining a home.
To Buy or Not to Buy?
The next time your friend or family member tries to convince you that home ownership is obviously “the right thing to do,” don’t let yourself be swayed. It might be, but it also might not—it’s no longer that simple.
Instead, do the math or work with your financial advisor to come up with the best investment and spending strategy that will allow you to maximize your returns. With that in mind, you’ll be in a much better position to make the decision that works best for you.