There is a point in their lives when virtually all Canadians ask themselves if they should buy a home or keep renting. Traditionally considered a sign of adulthood, owning a home is seen by Canadians as the most stable investment a person can make, and something that every person should aim for.
However, there are other factors such as lifestyle or financial circumstances that add complexity to the decision of buying a home. That’s why many young Canadians are starting to see homeownership as something more optional than mandatory.
Starting from this new mentality, buying vs. renting a home in Canada has a series of pros and cons to consider before making a decision.
Pros of Renting
More Flexibility and Freedom
It’s easy to pack your things and leave when you rent a home. This advantage is closely linked to people’s lifestyle. It doesn’t make much sense to own a home to live in when you have to (or like to) move frequently.
Less Maintenance Costs
Buying a home is a big ticket investment that requires constant upkeep and maintenance to keep its value over time. If you rent, this responsibility goes to your landlord or the property management company.
It Can Be Cheaper
In general, paying a monthly rent can be more affordable than committing to pay a mortgage for several years, especially if you’re not thinking of settling in the area you’re currently living in.
You Can Still Benefit from Investing in Real Estate
Buying a property is not the only way to invest in real estate. Options like REITs allow investors exposure to the benefits of real estate without buying a single property, and overall are easier to trade and sell when the time to take profits comes.
Cons of Renting
Less Stability
There are cases when a landlord chooses to put their rental property for sale, even if there is a tenant occupying the property. The laws for this situation vary from province to province. In the case of Alberta, landlords are free to sell an occupied rental property without notifying the tenant. However, the lease contract remains in effect and the landlord must give notice of at least 24 hours for visits and repairs.
Once the property is sold, the exit of the tenant will vary depending on the type of contract. If it’s a year-long lease, the tenant can’t be evicted until the contract expires. If it’s a monthly lease the landlord has to give the tenant a notice to vacate, and the tenant has a 90-day period to leave the property.
No matter the circumstances involving the sale of the property you’re renting, it is a very stressful situation to be in and can cause tenants a hassle to find a new place to rent.
Rent Increases
Your landlord can increase the rent at the end of the rental period. The amount varies from province to province, but no matter where you live this can make renting your home a less attractive option financially in the long run.
No Freedom to Make Changes
You may have the flexibility to leave your rental house or apartment when you need to, but you can’t make any changes. Even cosmetic changes such as painting or installing extra amenities require your landlord’s approval, which can make your place feel less like home.
Pros of Buying
Stability and Freedom of Choice
Owning your home means you are not living under the will of a landlord. No one is going to evict you because of a sudden sale, or any other unexpected event. Also, if you want to paint or make a large renovation, you don’t need to ask for permission. You can truly make your property your home.
Build Equity
Eventually, the monthly mortgage payments you make help you build home equity, one of the most important indicators Canadians use to calculate the distribution of their wealth.
Many people use their home equity as an asset to borrow against with a home equity loan, often used for large purchases, like home renovations, university tuition fees, or medical bills.
Accumulate Capital Gains
Another advantage that helps you build wealth is that Canadians don’t have to pay capital gains tax for their primary residence, all the value your home might accumulate over time will go into your pocket.
Cons of Buying
(Sometimes) Hard to Sell
If you want to sell your home, you might get caught up in market fluctuations that could give you a hard time to sell your home at a good price. Depending on the market, your home can be listed for months.
Maintenance Could Get Pricey
Home ownership is an investment that demands ongoing maintenance costs to keep your property in good condition, and these costs could get unexpectedly higher in case of a major emergency repair.
Buying vs. Renting a Home: What’s Better?
There is no right or wrong answer when it comes to buying or renting a home. Your lifestyle and financial situation need to be considered carefully before making a decision on your housing needs. With proper planning, you can still invest in real estate and enjoy its benefits without buying a home if you wish so, and become a homeowner when your life situation requires you to settle into a home for the long run.
