The Pros of Renting

 

Ease of Movement

When you rent a home, you are free to move on as soon as your lease is expired or you’ve given proper notice. This is one of the most common reasons for renting a home, rather than buying. If you are unsure of how long you will be living in an area, renting is usually your best option. Selling a home can take time, so it makes sense to buy a home when you are sure that you want to stay in the home for a few years. This allows you to build up equity and make money when you sell, which you cannot do when you rent.

No Property Tax

For many homeowners, next to their mortgage payment, property taxes are the second highest cost of owning a home with fire and property insurance being a close third for expenses. These are two costs that you do not have to pay when you rent a home…. or do you? It has often been said that the cost of property insurance and property taxes are enough to make people rent, rather than buy. But think about this, the landlord of the property that you rent is also paying property taxes and insurance. So, who is really paying for these? The tenant is! The cost of the tax and insurance are being passed on to the tenant and “included” in the price of rent. This means that tenants are unknowingly paying the taxes and insurance for their landlord, without the tax advantages of owning the home themselves.

No Maintenance

Over time, every home needs maintenance, and repairs. When you rent, the repairs are passed on to the landlord or property management company. This is one of the most popular reason to rent but, there are down sides to this as well. Some landlords are not very prompt or easy to work with which could have you waiting extended periods of time for repairs to be done or they don’t get done at all. However, if you have a good landlord, your maintenance worries are minimal.

The Pros of Buying

Make It Your Own

When you buy a home, you are free to paint, change fixtures and flooring, tear down walls, or even put up new walls. It’s your home and you can do whatever you want with it. When you rent, you are not allowed to remodel. Having the freedom to do what you want with your home is one of the greatest benefits of owning a home. A home is a place where we spend the bulk of our time, which is why we want it to reflect us and our design preferences.

No Payment Increases

When you agree to the terms of your mortgage, chances are that you will have a fixed rate. This means that your mortgage payment will not increase over the life of the loan allowing you to maintain a long-term budget. The security of knowing what your monthly payments will be over the next five or more years is very comforting whereas it’s likely your rental property will have a payment increase when the lease is resigned.

Build Equity

When you buy a home, a large portion of your payment goes straight to paying off your mortgage. Every time you make a payment, you earn equity in your home. As the value of your house increases, your mortgage goes down and your equity steadily rises.

When buying a home in an area that appreciates well, if you pay down your mortgage over 5 years, you will have a nice chuck of equity to use however you like. You can use your equity to move into a larger home, refinance, to buy an investment property, take out some cash for renovations or to pay off other debt, or leave it alone and let it grow. Essentially, buying a home is a forced savings plan where you will likely not be paying any more per month than you did when renting, however you are saving a good percentage of your payments to use down the road when needed.

The cons of Renting

Payment Increases

In Fort St John, rents have been steadily rising for years which is supported by the fact that our area has been consistently identified as one of the top investment markets in BC. This makes it hard to plan your long-term future finances when you don’t know what your rent payments are going to be year over year. Once a fixed term lease is expired, a landlord can raise the rent as high as they want. If you disagree to the new terms, you’ll need to find a new place to live, which brings the additional expense of reconnecting utilities, moving expenses and it is exhausting. The unknown future of rents can make tenants feel insecure and unsettled

Lease Deadline

When you sign a fixed term lease, it will have a deadline. Most leases are for a year. Once the lease is up, there is no guarantee that you will be able to renew. Perhaps the landlord will sell the rental property after a lease is expired to generate a hefty return on their initial investment. The future is uncertain when you are a renter, making long term life plans more difficult to plan.

No Equity

Every rent payment made goes straight to the land lord. You do not have any equity in the property. Knowing that every dollar of your rent is gone for good is hardest part of renting which is why tenants usually begin looking in to owning their own home. Imagine renting for 10 years at a conservative amount of $1000 per month. Over 10 years that will be a total of $120,000.00 paid that you will never see again. Compare the advantage of owning… At the same payment amount of $1000 per month with our current mortgage rates, a minimum of 1/3 of your monthly payments is applied to your principle and pays down your loan. Over a 10-year period you will have built an estimated $40,000.00 in equity all the while your payments remained the same as if you were renting.

 

The Cons of Buying a Home

Money For a Down Payment

When you buy a home, the mortgage company requires that you to put a certain amount of money into the deal as a down payment. This is a minimum of 5% of the cost of the home. There are down payment assistant programs and other mortgage options for those who qualify, so this is not always a con to owning a home. It is a misconception that all home buyers need 20% down. The best way to find out if you qualify for down payment assistance is to talk to a qualified mortgage lender and know your options

The Cost of Selling

Selling a home can be costly. If your home needs updates and repairs before selling, you’ll have to come up with the money to make those necessary improvements before you list the home for sale. Selling a home can be more stressful than buying a home. It requires planning and preparation with the help of your real estate agent to do it right and make the most amount of money when you sell. In addition to the legal fees associated with buying and selling a home, upon the sale of your home is when you pay your real estate agent. Take the time to discuss this in details with your realtor BEFORE you list your home for sale.

Responsibilities of Home Ownership

When you own a home, it is your responsibility to maintain the property. Whether it is regular services of the heating system, annual maintenance of the drains and gutters or maintenance of the landscaping these are your responsibilities. If the home needs necessary flooring updates, replacing old or windows or shingles, or a much-needed bathroom renovation, when you own the home the costs of these repairs also falls on you. Many home owners prefer this if they can fix problems themselves. This is referred to as “sweat equity” and it is a great way to pay yourself for your labor and expertise with the increased value to the property in the form of equity.

 

The Conclusion

Both renting and buying have their advantages and disadvantages. It really comes down to the stability of your living situation and income. If you have a stable career and you feel like you are going to be in your current city for a while, buying a home simply makes sense. If your life is up in the air and you don’t know what next year is going to bring, renting a home for the short term may be a better option. Buying a home costs less overall and builds your financial future. Renting a home is expensive over time and leaves you without any ownership or equity.

Taking the time to look at all the pros and cons of each option will help you plan your life and move in the direction that benefits you the most. If you plan to buy a home in the Fort St John area contact me, I have a ton of information that will help you to begin the process of buying your first home. Good luck and happy house hunting