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Blog > Financial Benefits of Renting in Today’s Real Estate Market
After years of skyrocketing housing prices, the real estate market is finally seeing a market correction. In fact, reports predict Canadian housing prices will drop by up to 16% this year. This has many first-time buyers wondering what is better, renting vs. buying a home.
Job stability, finances, your short and long-term plans, and your personal goals should be considered when deciding whether buying a home or exploring the Canadian rental market is right for you.
While there are several benefits to owning your own home, renting a place is also highly beneficial. Some would-be buyers are discovering that the financial benefits of renting a place in today’s real estate market outweighs the cost of homeownership.
Monthly Financial Benefits
Your mortgage payment or rent affordability in Canada should follow the 40% rule. This means that 40% of your gross monthly income should go towards your total living expenses. Mortgage payments, insurance, taxes, utility bills, maintenance, and other household expenses can quickly leave you feeling pocket poor after all the bills are paid.
Depending on the neighborhood you choose, monthly rent payments are usually cheaper than a mortgage payment. Landlords are responsible for the taxes, upkeep, and repair costs. Some leases also include utility bills like hydro, electricity, water, and cable, so less money comes out of your pocket.
It costs far less to move into a rental property than buying one. If you are buying a house, you will need to put a down payment on the property as part of the purchase. The Government of Canada regulates that a minimum of 5% must be put down on homes under $500,000. You will also need money for the legal fees, closing fees, and other expenses related to buying a home.
If you a renting your place, all you will need to move in is a damage deposit, which is usually half of a rental payment and the first month’s rent, so your savings will stay in your bank accounts. Your local rental board can tell you what your tenant rights and responsibilities when signing a lease.
Renting does not put you in debt. The cost of homeownership means you must take out a loan with the bank to own the property.
Buying a home is the easiest way to build equity but you must live in the home for a minimum of five years before you see a healthy return on your investment. Your money is also locked into the cost of homeownership, so to access the equity, you will have to sell your home or apply for a reverse mortgage.
Rent affordability in Canada gives you the freedom to build equity through other investments. Depending on where and what you invest your money in, your equity is easier to access when you rent.
Renting a place gives you more freedom in choosing where you live and for how long. If you want to explore different neighborhoods or cities, the Canadian rental market is a great place to look for a home. Because there is a shortage in supply versus demand for single-family homes, rent is cheaper in most neighborhoods than buying a home, so you have more options to save money while exploring different cities and neighborhoods.
Leases are easier to terminate than selling a home so it’s easier to move out of a rental. If you need to move before the end of your lease, your rental board can provide information about your tenant rights and responsibilities for subletting your place or terminating your lease.
If an emergency happens, do you have the money in the bank to cover the unexpected expense? When comparing renting vs buying a home, you are less likely to have to pay a sudden and pricey repair. If plumbing needs work, the heating goes, or one of your appliances stops working, the landlord is responsible for the bill, not you.
In today’s fluctuating real estate market, there are many financial benefits to renting a home.
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