The average selling price in Toronto for 2013 was $523,036 and 2014 looks to be another solid year for home prices. From the down payment to qualifying for a mortgage, buying a home in Toronto can be a challenge. Renting on the other, has lower up front costs and a lower barrier to entry, though you’re not building a long term asset.
It’s a tough decision and also a personal one. Unfortunately, no one make the decision for you, but I can offer some advice and point out some important factors to consider.
The decision of renting versus buying depends on many factors, mainly, how fast prices rise and how long you plan stay in your property. Let’s look at how some of the most important financial costs associated with home buying to compare against a monthly rent cheque:
Other Costs to Owning a Home:
In addition to your monthly mortgage and down payment, don’t forget that there are other costs that come along with buying a home. James Harrison of Mortgages.ca, a Toronto mortgage broker, says that many first time buyers are unaware of the extra expenses at the time of closing as well as ongoing expenses. For instance, there’s property tax, homeowners insurance premiums, and fees known as “closing costs.” The Toronto Real Estate Board offers a detailed list. Check it out here.
In order to make an informed decision on renting vs. buying, you have to consider the long-term benefits of owning (in other words, what your house will be worth if you decide to sell in the future). This mainly depends on your mortgage and the housing market. There’s no surefire way to predict this, but your best bet is to consult with a trusted real estate professional, do research, and do your math to get a realistic sense of the future value of your home.
A big difference between home ownership and renting is lifestyle – and more specifically, mobility. Simply put, when you rent a property, you have more freedom. Renting makes it easier to move for a relationship or an exciting new job offer, and there is also often more choice when it comes to specific living locations. Looking for an apartment or townhome near a park in Vaughan? You may have an easier time searching for a rental. Moreover, many renters love feeling that they’re not tied down financially to their living space and can move on a month’s notice.
General Upkeep and Safety Costs:
Owning a place usually means that you can make it “your own.” As a homeowner, you are in control of the property. You are in charge of the expenses – both big and small – when it comes to home improvement and upkeep. When it comes to renting, on the other hand, landlords are normally responsible for general upkeep and safety, allowing you to focus on the fine points like indoor decor. When deciding if you’d like to buy or rent, you have to think about whether you are willing to put in additional time and money for the look and upkeep of your place.
Image Credit: New York Times
Online calculators offered by banks and other sources are great resources that let you compare the costs of buying vs. renting a home, allowing you to input factors such as your rate of return on investments, condo/common fees and your tax bracket. Click here or on the picture above to try one out for yourself.
Ultimately, whether you decide to rent or to buy your next property, it’s a personal choice with its own ups and downs. If you have questions about both buying and renting, feel free to contact me here. Thank you for reading and please let me know if you have any questions or comments in the area below!