How to Decide Whether to Rent or Buy Real Estate

Yes, purchasing a home is an essential step in your life, but is it the right one for you? Renting vs. buying has advantages and disadvantages; that’s why there isn't a simple answer. Personal finances are a crucial consideration in your decision-making process, and renting appears to be the more cost-effective alternative in most circumstances.

If you're undecided about renting or buying a home, here are some things to keep in mind.

How Long Do You Intend to Stay in One Place?

Purchasing a property can make sense if you know you'll be in it for at least five years. You can personalize your home and make it truly feel like yours, which is a plus from both a financial and emotional standpoint.

For some who want a more itinerant lifestyle, renting is preferable. We can use the case of a job advancement that's halfway across the country as an example. As a new employee, you don't want to deal with the headache of selling your property. Perhaps you've just moved to a new neighborhood and want to spend some time getting to know it before deciding where to settle down.

Can You Afford the Cost of Buying?

Because of the upfront fees associated with purchasing a home, renting is often less expensive than owning one. A down payment, closing charges, moving costs, renovations, and other home maintenance costs are included in this sum.

A house may be out of reach financially even if you can afford a monthly loan payment because costs mount up. Additionally, you'll have property taxes, homeowners insurance, and (in many cases) mortgage insurance to pay, as well as homeowners association (HOA) fees, which can add up to a lot of money each month.

Purchasing a property is more affordable than renting in the majority of the country. Homeowners pay less on their mortgages than renters after six years of ownership. Rental costs are assumed to rise at the rate of 5% each year, while the homeowner's monthly payment remains the same.

In addition to reducing your taxable income, owning a home can reduce your mortgage interest and state and local property taxes. However, recent tax changes can limit the amount of these expenses you can deduct. After three years, a homeowner's payment is cheaper than a renter's.

Bottom Line

When weighing the pros and cons of renting vs. owning a home, keep in mind that you must be honest about your financial condition. Be honest about your ability to pay for other up-front expenses such as a down payment, repairs, moving expenses, and purchasing new furniture once you've calculated the costs of renting versus purchasing. That's not to imply you should go out and buy a house as soon as you get married or settle down somewhere. As long as you're determined to have a place of your own, renting for a few years as you save up for a down payment is OK. 

If you are looking for Real Estate Agents to help you with buying or selling your home, Sarit & Jordan Zalter proudly serve the real estate needs of residents in Ancaster, Dundas, Flamborough, Hamilton, and Burlington. Contact us today! Ask us for our Buyer's Questionnaire  to help you dig deep into what you are looking for!