Owning a home is (apparently) considered the “Canadian dream” (at least, since February, when Mike De Jong said it was). Maybe not surprisingly, it’s a goal of many millennials.
In 2015, 51% of people born between 1980 and 2000 owned a home, and despite our reputation for living with our parents until we’re 30 and wasting our money on iPhones, millennials are actually buying houses earlier than our parents did.
Buying a house is likely going to be the biggest purchase you make in your life, and like any big purchase, it’s always a good idea to evaluate why you want to make that purchase.
Is it something you can’t live without?
Will it make your life better?
My husband and I bought our first house last year, and I am so happy with our home that I sometimes just pat the walls lovingly. Friends of ours though are self-identified lifetime renters and it works out fabulously for them because they have a jet setter lifestyle that doesn’t lend itself to putting down roots in the form of a $300K mortgage.
Is owning a home the right decision for you?
You don’t get a prize for buying a house. There’s no grown-up points for having a mortgage. Whether you decide to buy a house or rent an apartment for life is as much a lifestyle choice as it is a financial one, and before you make the decision, really think about what you want and how that impacts your lifestyle and by extension, your bank account. What are your priorities?
Me, I love driving and I dote on my car more than any human child, so my commute is actually one of the most enjoyable parts of my day. I am an outlier in this, I know, but this is the lifestyle I wanted, so a house in the suburbs worked well for me. If I didn’t enjoy the drive or if I resented my transportation costs, then a house closer to the city or an apartment downtown would have been a better choice.
With that in mind, there are pros and cons to both renting and buying; and it’s a personal choice as to which one is the right option for you.
|Costs||Usually fewer monthly costs i.e. rent payment, perhaps utilities.|
Rent is fixed, usually for a year.
You might have to pay a deposit of a month's rent and/or a deposit for damages.
|Extra costs in addition to mortgage, like property taxes, utilities, maintenance, insurance.
You’re paying interest on your mortgage.
You might have unexpected repair costs.
|Return on Investment||Your rent money goes directly to your landlord.||You can build equity as you pay down your mortgage.|
|Maintenance Responsibility||You’re not responsible for maintenance.|
You’re dependent on the landlord to make repairs, and you don’t control who comes to do the repairs and to what level of quality.
|You’re responsible for maintenance and repairs of home and yard, which costs time and money.
You can make your choice of service persons or companies, and have some control over when they arrive.
|Improvement Ownership||The value of any improvements or repairs you do make goes back to the landlord||Improvements or repairs increase the value of your home, which you benefit from.|
|Location/Commute||Typically rent is higher in urban areas.|
You may be closer to nightlife and amenities.
You save time and transportation costs with a shorter commute.
|Houses in the suburbs are typically more affordable.
You may have more greenspace and sense of community in a suburban neighbourhood.
You likely have a longer commute, with associated costs.
|Flexibility/Stability||You can move out almost whenever you want.|
Your landlord can kick you out or raise your rent.
|Your living situation is under your control, giving you more stability.
You may not be able to quickly sell your house, and there are transaction costs associated with selling.
You might face a mortgage penalty.
This buy or rent calculator can help you decide, by the numbers, which option is right for you. And if you’re leaning towards buying a house, make sure you check out the Real Life Ratio calculator (clicking the link downloads the Excel sheet) from the Globe and Mail’s Rob Carrick to see if you are ready to pay the costs associated with owning a home, based on your income and expenses.
I’d love to hear from you – is buying a house a goal for you or do you prefer the flexibility offered by renting?