Buy or Rent?

Buy or Rent?


The decision between buying a home and renting a place is one of the biggest financial decisions that many people have to make. Many factors can drive the decision.

Some initial and recurring costs to consider:

Buying

  • Initial costs – down payment and closing fees.
  • Recurring costs – property taxes, mortgage payments, homeowner’s insurance, maintenance and repair costs, and community living fees (if applicable).

Renting

  • Initial costs – security deposit and broker’s fee (if applicable).
  • Recurring costs – monthly rent and renter’s insurance.

Other factors to consider:

  • How long do you plan to live in the home?
  • The cost of housing. Is renting or buying more expensive in your market?
  • Opportunity costs. If you don’t purchase a house, what can you do with the cash and what return can you get?

Buying vs. Renting Pros and Cons

Pros for Buying:

·      Home equity and wealth creation.

·      Greater stability.

·      Ability to renovate and customize your home.

·      Tax benefits.

·      No monthly payments once mortgage paid off.

·      Property appreciation.

Cons for Buying:

·      Cash required for down payment.

·      Mortgage interest.

·      Property taxes.

·      Homeowner’s insurance.

·      Recurring repair and maintenance costs.

·      The risk of property depreciation.

Pros for Renting:

·      Greater mobility.

·      Landlord takes care most of repairs and maintenance.

·      Having amenities that are expensive to maintain (e.g. pool, gyms, rooftop terrace, etc.)

·      No exposure to home price depreciation.

Cons for Renting:

·      Restrictions. E.g. owning a pet, painting a wall.

·      No home equity or ownership.

·      Recurring rent payments.

·      Increasing rent, even with rent control.

·      No tax benefits.

The decision to rent or buy should be based on finances as well as lifestyle and preferences. In general, buying a house is better if you plan to stay at the house for a longer time. Buying a house also gives you an opportunity to build wealth.

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