Rent or Buy?
What's Best for You?

To rent or buy a home is a very common question and sometimes, it's hard to know what to do. What's best for you? It can be a confusing time, especially when it comes to learning a lot of new real estate terminology. 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:

  1. Have you ever thought about owning a home mortgage-free?
  2. Are you securely employed (Is that even possible? A little pregnant?)
  3. Have you ever been personally bankrupt?
  4. Have you ever leased a car or borrowed to purchase one?
  5. Have you ever been late with a loan or credit card payment?
  6. Are any credit cards or retail charge accounts maxed out?
  7. Have you ever defaulted on a loan?
  8. Have you ever defaulted on a mortgage and lost a home?
  9. Have you checked your credit score recently?
  10. Have you ever had any judgments or executions against you?
  11. Have you any savings for a down payment?
  12. Do you move often for your job?

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

Advantages to Remaining a Tenant

The landlord is usually responsible for major maintenance and repairs, at least a fridge and stove are typically included, you can move when your lease matures without having to pay lawyer and real estate fees and ... well, I think that's about it. Over the long term, it's definitely better to own. Read on and learn why.

If you must remain mobile, if your business or employment involves periodically relocating elsewhere in country (or world), 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 still benefit you with a nice capital gain, even considering real estate commission and assorted closing costs.

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Rent or buy? Hmmm

Let's see. If you lose your job and are unable to pay the rent, you'll be evicted. If you lose your job and fall behind in your mortgage payments, the bank will either act under the power of sale clause in the mortgage or foreclose and you'll be ... wait for it ...evicted.

Different Scenarios
Same Result

You lose in both cases because you're forced to move. And both could adversely affect your credit rating. But I suggest that defaulting on a mortgage loan will likely have a worse effect on your credit rating than defaulting on a lease.

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, plus you're paying the 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 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.

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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 what gets done and when. Plus, you'll enjoy the pride of ownership that accompanies it.

Property values historically go in one direction - up. During a recession, they 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, the obvious decision whether to rent or buy is quite easy - keep renting and try to anticipate when it hits bottom. But with today's low interest rates, leaving your money in a regular savings account probably won't keep pace with inflation. Therefore, try to get your cash into a relatively secure investment vehicle such as a guaranteed investment certificate (GIC). At least you'll be a little closer to breaking even. 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 your family 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 when they're old, grey and retired.

  1. Do you want to control your own destiny?
  2. Are you afraid of getting an eviction notice?
  3. Any trouble getting your landlord to do basic maintenance?
  4. Are you reluctant to make the repairs yourself at your own expense?
  5. Is it going on the market and you prefer not to buy it?
  6. Planning to vacate your parent's home but unsure whether to rent or buy?
  7. Are you bothered about paying off your landlord's mortgage instead of your own and making him richer?
  8. Do you like the idea of improving your own home, building equity and increasing its market value for your future?
  9. Would you prefer to invest in your own property with each mortgage payment, rather than have rent expense 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.

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

If you have sufficient cash for a down payment and closing costs, the decision whether to rent or buy is a lot simpler. In Canada, average prices seem to be leveling off somewhat (except in the ridiculously hot Greater Toronto and Vancouver areas), there's a decent inventory of homes available, we're in what is commonly referred to as a balanced market in may areas, 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. 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 (or sell) a house or condominium apartment or townhouse.

Whether you want to rent or buy a home, it's a good idea to know what your money can buy ... or rent. Explore® in Canada and® in the United States.

How to Buy a Home

You've answered your question whether to rent or buy and want to take the plunge. What happens now? How to buy a home is really not that complicated, provided you have good honest guidance along the way. To save a lot of time, frustration and worries, it's a good idea to have ...

Dependable Representation

Finding an agent who sincerely puts your interest ahead of theirs can help you through what may appear to be a complicated process.

You can go the uninformed traditional routes of surfing countless out-of-date 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. Time is our most precious commodity. Every moment is irreplaceable. So ...

Let a REALTOR® invest their time to save your time.

During the initial consultation, your agent will advise you to get all your 'ducks in a row' before even beginning the search process. They'll ask numerous questions regarding your wants and needs, including 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. Thus, 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?

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There's not a huge difference between buying vs renting. In either case, it boils down to wants, needs and affordability. 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. (In some cases, there will be 2 land transfer taxes to pay.)

From this basic information, they'll calculate your gross and total debt service ratios to ensure your dream home won't turn into a nightmare. They'll 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 such as real estate commission, legal fees, disbursements and movers. Therefore, 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 britches.

Now that you're off to a good start in learning how to buy a house and what a good agent can do for you, it's time to get busy, do some research on first time buyer programs in your area and go buy a home.

If you're interested in a definitive guide to buying and selling real estate (including maybe changing your life), whether privately or with the guidance of a qualified realty agent, check out my book The Happy Agent. It's chock full of tips and techniques involved in searching for and negotiating to purchase real estate that I learned and practiced during my successful 4 decade realty career. A small investment of your time and a pittance of your money could conceivably save you thousands of dollars and a ton of heartache, and help you trade in real estate like a pro.

Available virtually everywhere print and e-books are sold.

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