Advantages of Renting
Price – renting can be much cheaper than buying
No commitment – Although most landlords would like you to sign a one-year lease, this can sometimes be negotiable and it may even be possible to start with a month-to-month contract.
No maintenance – If the furnace dies…call the landlord. If the plumbing backs up….call the landlord. If the electrical system is acting up…call the landlord. The only repairs you are responsible for are the ones that you or one of your guests has caused. (Plugging up the toilet is the tenant’s responsibility…not the landlord!)
No headaches – it’s easy to move on if you don’t like the place or need something bigger, and you don’t have to worry about selling, or finding a new tenant.
If the real estate market takes a big dive, you don’t need to worry. If the interest rates go sky-high, that’s no concern for you. And you can always look for someplace cheaper to live if you need to. If you own your own home, try asking the bank to reduce your payments, and see how far you can get!
Disadvantages of Renting
You have no control over your own living space. You can’t renovate or decorate as you’d like, and always have to ask permission to make changes. If you don’t get the okay from the landlord, you will either have to return your unit to its original condition, or pay to have the landlord do the work.
Most rental units have many, many regulations regarding smoking, pets, parties, noise, and so on. If you were to buy a condo, you would likely have the same regulations, but if you bought your own house, you would have more freedom to live your own life. Have as many pets as you want. Throw a party every night if you want. You get the idea. If you rent, breaking those rules can get you evicted, which can be very inconvenient.
You are helping to pay off someone else's mortgage, when you could be paying down your own.
If you live in an apartment, you have to put up with other people’s noises and smells. If you’re used to it, no problem, but it can be unpleasant at times.
Advantages of Buying
Investing in yourself. You won’t be paying the mortgage for anyone except yourself. And if the bank is willing to lend you the money, you can be sure they think you can afford it. That’s their business…to lend you money. They won’t give money to a poor risk.
Equity increase. You can improve your asset. New paint and flooring can increase the value of your house significantly, depending on the condition it was in when you bought it. And if the bank agrees that the value of your house has gone up, you may be able to withdraw some of that equity to purchase something else that is important to you, generally through a line of credit. That money can come in very handy!
Choices. When prices drop, as they have lately in many cities in North America, it’s a great time to buy. Statistics show that real estate will always increase in value. Do you know of any houses that are worth less than they were twenty or thirty years ago? What goes down will always come up. Real estate prices always go up and down, but they almost always go up higher than the time before. You don’t have to buy when prices are high, but you can buy what you can afford if you don’t want to wait for another slow down in real estate.
Freedom. You can do whatever you want. The only people that can stop you are the police, the building inspector, and the health department! Well, maybe some others too. But you can have as many pets, parties and friends over as you like.
Pride of Ownership. This is very important to some people. There’s nothing quite like the feeling of living in something that you own! Cutting the grass or shoveling the driveway at a rental house isn’t nearly as satisfying as cutting your own grass and shoveling your very own driveway.
Stability. You can’t get a notice saying that your unit is being sold, or you will have to move out because the landlord wants to do major renovations.
Long term benefits. When your retirement days start to loom over the horizon and your house is paid off, life can be very good. If you are still making those monthly rent payments, chances are that you will have to pay them for the rest of your life. And rents seem to increase faster than pensions do!
Disadvantages of Buying
Being locked in. For some people, it doesn’t make sense to buy. If you think that your job will take you to another city every few months, it’s probably not a good idea to buy and sell your house each time you get transferred. Even if you only move once a year, it’s expensive to sell and then buy another home each time.
Maintenance. You are the one that will have to look after all those pesky little issues…toilets, sinks, leaks, mildew, electrical problems, etc. If you have to hire someone every time something goes wrong, it can get expensive.
Paying the bills. Often rental units come with some utilities that are paid for you, like water and sewage, or hydro, or gas. And it’s nice to turn up the heat on those chilly days knowing that someone else is paying for it. And if you can’t pay your bills, there are consequences.
Affordability. Not everyone is able to come up with even a 5% down payment. It takes cash to buy a house. Saving up isn’t easy, or even possible for many people. And if your credit rating is poor, chances aren’t great that the bank will be willing to lend you a whole lot.
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After taking into consideration the pros and cons of each situation, it’s still a personal choice. If you aren’t ready for the responsibility of owning your own home, or if your lifestyle would be better suited to renting, then that’s the right decision for you. However, financially it is a better choice if you can buy your own home. You’ll be increasing your personal worth, rather than that of the landlord.
If you have other reasons for making the choice that you have, that’s great. But please make sure that you have made a choice, rather than letting yourself drift into the situation you find yourself in. You may find that you will want to change your situation, and if not, at least you have decided what is best for you!