“Should I rent or buy a home?” – This is a common question on many people’s minds! And rightly so, it’s a major decision that can have a major impact on both your lifestyle and financial health.
Many people see property ownership as an investment vehicle that can help them build equity and allow them to benefit from tax savings. But renting has its advantages as well. Among other things, renting provides one with much needed flexibility and freedom.
Currently, Canada is predominantly a nation of homeowners. According to the latest statistics, around 68% of Canadians own homes while the rest live in rented premises.
So, which option is best for you? Should you rent or buy a home? To make the right decision, the following are the pros and cons of each option.
Pros of Buying a Home
1. Price Appreciation
Generally speaking, home values increase over time. For example, in Canada, the housing market has had an average annual appreciation rate of around 6.11% according to a study done by Reviewlution.ca.
2. Stable Housing Costs
Buying a home comes with a bevy of expenses, including down payments and closing costs. Also, as a Regina homeowner, there are plenty of maintenance costs to think about as well.
Luckily, homeownership costs tend to be consistent especially with a fixed-rate loan. Even in case the insurance rates and property taxes increase, your mortgage payments will remain relatively the same year to year.
Equity is simply the portion of the home that you actually own. It’s calculated by subtracting the mortgage loan balance from the value of the property. You build equity every time you make a mortgage payment.
This isn’t the same case with renting a home. As a renter, you won’t be able to recoup any money you paid as rent.
4. Ready Cash
This is another advantage of buying a home rather than renting. By owning a home, you’re able to tap into your equity to help pay off personal debt or fund home improvements.
5. Tax Advantages
The Canadian government offers several credits and tax breaks for homeowners to take advantage of. For example, if you’re a first time home buyer, you may qualify for the First-Time Home Buyers’ Tax Credit (HBTC) of $5,000.
6. Freedom to Personalize
Owning a home allows you to take complete control over any projects you may want to take on. As long as the projects follow all local laws, you’re free to personalize your home to your liking.
When renting a home, your landlord may at some point decide to terminate your lease or fail to renew it when the time comes. Moving is one of life’s most stressful events. In addition, it’s also expensive and inconveniencing.
On the other hand, owning a home comes with stability and peace of mind. As the owner, you call the shots and that is priceless.
Cons of Buying a Home
1. High Upfront Costs
Upfront costs of buying a home in Regina include a down payment, mortgage lender fees, HOA fees, and escrow fees.
2. Maintenance & Repair
You’ll need to set aside anywhere between 1- and 3% of your home’s purchase price annually for maintenance and repairs.
3. Property Taxes
The property tax rate in Regina is around 1.030228%. And besides the property tax, you’ll also be required to pay for other fees, as well. Including, HOA fees and utility fees.
4. Less Flexibility
Unlike renting, owning a home doesn’t provide you the flexibility to move if you’d like a change of pace.
Pros of Renting a Home
When you rent, you have the freedom to live in lots of different areas.
2. No Downpayment
The only ‘down payment’ you may probably have to put down is a security deposit. That said, it’s refundable at the end of the tenancy as long as you abide by the terms of the agreement.
3. Might be Cheaper
This may be true at least in the short-term and is relative based on your rental and where you live. But generally speaking, renting is usually cheaper than owning a home.
4. Less Maintenance Responsibilities
While you may be responsible for some maintenance tasks, you won’t be on the hook for major ones. The responsibility to maintain a property to certain health and safety standards is your landlord’s.
Cons of Owning a Home
1. Zero Tax Benefits
There are no tax breaks associated with renting a home.
Most landlords have restrictions on things like smoking, subletting, and even whether you can keep a pet or not. You also won't have full creative freedom to personalize the space, at least not in the same way a homeowner would.
3. Rents Can Increase
Landlords in Regina have the right to increase rent in accordance with the terms of the lease.
4. No Permanence
Really, there is no guarantee of permanence when it comes to renting a home. While it’s possible to rent a home for decades, there’s a strong likelihood that you’ll have to leave at some point.
5. No Equity
There is no way to build equity when renting a property. Yes, it’ll be your home/ place of residence, however, it won’t be your asset.
6. Zero Returns
No matter how long you rent, you won’t benefit from any appreciation in the value of the property.
Which Option is Best for You?
Clearly, each option has its own set of pros and cons. If you’re the kind of person that travels a lot – whether for business or for pleasure – then renting can be a good option to consider.
But for people looking to set down roots, buying a home is a no-brainer. It can help you build long-term wealth, as well as enable you to make many exciting decisions, from renovations to landscaping to furniture selection.