Own vs Rent

Own vs Rent

December 4, 2015
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RentvsownHere are 10 reason’s it is better to own than rent:

  1. It’s cheaper than renting. Once you have saved for the down payment you will likely find that mortgage payments and property taxes is less expensive than rent. This is particularly true with mortgage interest rates being historically low right now.
  2. Predictable payments – With a fixed rate term mortgage you know your mortgage payments will be the same for the duration of your term (usually 5 years). With rent, your landlord can decide to increase the rent at any time once your lease is up. Most leases are for 1 year at a time. In Alberta, landlords have the right to increase rents by as much as they see fit. You may find yourself unable to afford your rental property and be forced to move. There is a peace of mind in knowing that won’t happen to you!
  3. You can have pets! – Most landlords won’t allow pets or charge a premium if you have any. Many renters are forced to give up their beloved pets because they are unable to find a rental property that will allow them. When you own you will be certain to be able to provide a stable home for the rest of your fur babies’ lives. They deserve that right?
  4. Stability – You won’t have to worry that your landlord may decide to sell, have family members move in, tear it down to rebuild…etc. Perhaps you won’t get along with your landlord and you are forced to move. You will feel more secure and so will your children. Renters often have to switch schools for their kids simply because they move more often. Not a good thing! Who needs that kind of stress and hassle?!
  5. You can make improvements to your home – When you rent you have to get permission from the landlord before you make any changes even if it’s just paint. When you own, you are the boss of the place! You can knock down walls, put up shelves or whatever your little heart desires. You will also find that you will be much more motivated to improve your home when you own it. Who wants to help the landlord improve their investment right? When you improve your own home you put money into your own pocket! It’s an opportunity to add value while making the home more enjoyable for you and your family.
  6. Pride of ownership – You will feel better about yourself when you own your own home. I am sure most can agree that there is sense of accomplishment when one manages to break into the real estate market. It’s an important milestone and usually shows that you have managed to save for a down payment, establish credit by being responsible with your bills, and have demonstrated that you have income stability. Congratulations! You’re in the club.
  7. You can rent out your home – Many people will rent out their home once they decide to move onto another one. That way you have the potential to make a profit each month after expenses are paid while having someone else pay down your mortgage for you. You can build your own net worth even faster. Many people do not realize that you do not need to be a first time home buyer to purchase another owner-occupied home to qualify for a 5% down mortgage.
  8. Better quality housing – Chances are good that you will pay rent for a home that is not as nice as the one you would own for a similar payment or even less. Many rental properties are dated and have been subjected to wear and tear by previous tenants. As well, they are often located in less desirable areas where there is more crime and schools are not as good.
  9. You will have a higher net worth!! Suppose you buy a home for $239,000. Your mortgage payments with 5% down payment with 2.75% fixed 5 year interest rate with 25 year amortization would be $1,086 monthly and property taxes estimated at $133 per month. Rent for a comparable home would likely be around $1500 (which can increase remember).   Historical data shows that real estate prices tend to increase by average of 3.5% per year. We would estimate the value of the home in 5 years based on that reasonable assumption would be approximately $275,000. The balance at the end of the 5 year term, assuming no additional payments have been made, would be $200,937.96. You will have increased your net worth by just over $74,000 with an initial investment of down payment of only $11,995!!! The savings can be set aside for maintenance and improvements. As well, if you invest in improvements like a finished basement you will add even more value. You would be hard pressed to do the same while renting and in only 5 years. The effect is obviously much more dramatic over time. Win!!
  10. It’s forced savings –Let’s be honest. Most of us are not good savers. However, you have to pay for housing one way or another whether it’s rent or mortgage payments. With a mortgage payment you are contributing to your own net worth and not your landlord’s. So, even if you do nothing else right, if you buy then you will have something to show for all of your years of paying down the mortgage and it will eventually be paid off. Not the case with renting.

Call me today for further clarification on the above or if you or someone you know is ready to start building your/their own equity.

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