Rent or Buy?
What's Best for You?

To rent or buy a home is a very common question, and it's hard to know what to do. What's best for you?

It can be a confusing time, including learning tons of real estate terminology. And with possible government first time home buyer plans, it's really tempting to jump in with both feet. To help you decide whether to rent or buy, ask yourself the following questions:

* Do you like the idea of staying put for a long time, and eventually owning your own home mortgage-free?

* Are you securely employed (Is that even possible? Like being a little pregnant)?

* Have you ever been personally bankrupt?

* Have you ever leased a car or borrowed to purchase one?

* Do you make all your loan and credit card payments on time each month?

* Do you have any credit cards or retail charge accounts? Are they maxed out?

* Have you ever defaulted on a loan?

* Have you ever lost a home through defaulting on your mortgage?

* Have you checked your credit score recently?

* Has anyone ever successfully sued you and gotten a judgment or execution against you?

* Do you have a down payment?

* Does your employment cause you to move often?

You may be surprised that you might qualify for a mortgage with very little equity, provided your credit rating is good. Also, there may be first time home buyer programs available to you.

There are some ...

Advantages to Remaining a Tenant

The landlord is usually responsible for major maintenance and repairs, you can move when your lease matures without major expense, and ... well, I think that's about it.

If you must remain mobile, if your business involves you periodically relocating to other parts of the country (or world), for example, then the decision to rent or buy is a simple one - rent. It's cheaper to part company with a rented property than home ownership.

The significant exception to this is if you're in a market where real estate values are rapidly rising. If your possible move isn't on the immediate horizon, home ownership might benefit you with a nice capital gain, even considering real estate commission, legal fees and disbursements.

Rent or buy? Hmmm

Let's see. If you lose your job, and you're unable to pay the rent, you'll be evicted. If you lose your job, and you fall behind in your mortgage payments, the bank will either act under the power of sale clause in the mortgage, or foreclose (which is very rare in Canada, but more common in the USA, especially since property values plummeted) and you'll be ... wait for it ...evicted.

Different Scenarios - Same Result

You lose in both scenarios because you're forced to move. And both could adversely affect your credit rating.

Rent or buy? Here's an example. You rent a home for 25 years. What do you have at the end of this period? After paying rent every month (that usually increases every year)(and you're paying your landlord's mortgage and taxes for him), and risking losing your home and upsetting the kids if the landlord decides to sell the house or move into it himself, you have no equity.

Conversely, if you'd bought that home 25 years ago, you'd have enjoyed it without risk of losing it(provided you paid the monthly mortgage and property taxes), watched its value increase over the years (through inflation and improvements), and ...

Paid It Off!

Wow ... you own your own home!

A nice nest egg for retirement.

Rent or buy? With home ownership, at least you have the opportunity to build your own equity instead of the landlord's retirement plan. Yes, you're responsible for all maintenance and repairs, but you decide on what gets done, and when. Plus, you'll enjoy the pride of ownership that comes with it.

Rent or buy? More Food for Thought

Property values historically go in one direction - up. During a recession, market values often drop somewhat, but if you're still making the mortgage payment, and you have no real need to sell, just stay put. Eventually, the market always rebounds.

If you believe your local real estate market values are declining, then, the obvious decision whether to rent or buy is quite easy - keep renting and try to anticipate when it hits bottom. But leaving your savings in a regular savings account probably won't keep pace with inflation. So, try to get your cash into a relatively secure investment vehicle, like maybe a guaranteed investment certificate (GIC) or something like this. Just ensure you'll be able to withdraw your funds without penalty, and on short notice, so you can buy a home when the timing is right.

Many people like to make investments. The stock and bond markets attract a lot of money, which is fine (sometimes). But a real estate investment, your home, is the only investment that you can actually live and work in!

Convinced Yet?

I'm sure the question whether to rent or buy, is asked by countless people every day. After all, most people, I'm sure, would not want to be paying rent after they retire.

Do you want to control your own destiny when it comes to where you live and raise your family?

Are you afraid of getting an eviction notice telling you to vacate?

Do you have any trouble getting your landlord to perform basic maintenance on your rented home?

Is your rented home falling down around you, but you're obviously reluctant to make the repairs yourself at your own expense?

Is the home you're renting going on the market, and you prefer not to buy it?

Are you ready to move out of your parent's home and into your own place, but you're unsure whether to rent or buy a house?

Does the idea bother you of paying off your landlord's mortgage instead of your own, and making him richer?

Do you like the idea of improving your own home, hence building equity and increasing its market value, for your and your family's future?

Would you prefer to be making an investment in your own property with each monthly mortgage payment, rather than having a rental expense every month that can never be recovered?

Rent or Buy a Home? Convinced Yet?

If you answer yes to any of these questions, you may want to seriously consider buying vs renting a home.

If you're still not convinced - well, maybe it's your destiny to remain a tenant.

If you have a down payment, as well as funds for closing costs, the decision whether to rent or buy is a lot simpler. In Canada, average prices seem to have leveled off somewhat, there's a decent inventory of homes available, we're in what is commonly referred to as a balanced market, and interest rates are still very attractive.

Don't be intimidated by the process or with real estate terms. Just explore more of this website.

Keep Reading

I think you'll find most, if not all of your questions answered.

And if not, send me your questions on anything related to how to buy a house by clicking the Contact Me tab on your left. Or if you're still unsure whether to rent or buy a home.

Whether you want to rent or buy a home, it's a good idea to know what your money can buy ... or rent. So, to explore the MLS® system in Canada, which will help you make your decision whether to rent or buy, click here And for American real estate, click here

How to Buy a Home

In order to save you a lot of time, frustration and worries, it's a good idea to have ...

Dependable Representation

Finding a REALTOR® one who sincerely puts your interest ahead of their own, can help you through what may appear to be a complicated process of buying a home.

You can go the uninformed traditional routes of surfing countless out-of-date REALTOR® websites, scouring the local newspaper, trudging through endless open houses, listening to as many pitches from all the attending agents, and spending your evenings and weekends driving neighbourhoods in search of lawn signs, looking for that elusive and affordable home that meets your needs. Or you can ...

Let a REALTOR® Save You Time & Effort

Time is our most precious commodity. Every moment is irreplaceable. So, let your REALTOR® invest their time to save yours. However, they'll advise you to get all your 'ducks in a row' before even beginning the search process.

During the initial consultation, your REALTOR® will ask numerous questions regarding your wants and needs, including your preferred location, style and size of home.

How many bedrooms? Bathrooms? Do you need a garage, or is that a luxury you can live without? What features would you like to see?

Of course, with every suggestion, you'll have a tendency to say yes. So, it's a good idea to categorize and differentiate the list by needs and wants. And you must also determine ...

How Much Can You Afford?

There's not a huge difference between buying vs renting. It still comes down to what you want, your physical needs, and what you can afford. Your Agent will ask some basic financial questions to determine a target price range, including the amount of your down payment.

Is it all yours or from borrowed funds? What's your gross combined income and outstanding debts with minimum monthly payments? They'll advise you on what to expect for closing costs, including the big one - land transfer tax.

From this basic information, they'll be able to calculate your gross and total debt service ratios to ensure your dream home won't turn into a nightmare.

Your REALTOR® may also suggest that you ...

Buy to Your Maximum Affordability

You may think they're just trying to increase their commission.

This may be true, but more likely, they may want you to not compromise too much in order to save a little money, because the more you compromise, the sooner you'll need to upgrade to a larger home.

This, of course, will result in a move sooner than later, with all the usual expenses like real estate commission, legal fees and disbursements, as well as the cost of movers. So, it might be wiser to invest in a larger home now and stay put longer, provided of course that you don't buy too big for your budget.

So, now you're off to a good start in learning how to buy a house, and what a REALTOR® can do for you.

Now, get busy, do your research on first time buyer programs in your area, and go buy a home.

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