Own or rent? Winning the tug-of-war

The housing market has gone wild in much of the country and it has people panting to make a good investment, and make the decision once and for all between own or rent. Slow down and consider all the angles before you dive in.

There’s something about money

Did you see that? Did you? The issue has shifted from “shelter” to “profit.” That’s because people believe that a home is a good investment. While money is a key consideration – and it’s a complex one – it shouldn’t be the only factor. That being said, if you’re going to make the decision between own or rent, you have to look at the dollars and cents.

So... should you own or rent?

First, there’s the straight calculation that compares the cost of carrying your own home with the cost of renting one. Sometimes that comes out a wash, which immediately brings people to the conclusion that renting sucks. Renters aren’t responsible for maintenance. Homebuyers also need to consider purchase closing costs which include legal fees, land transfer tax, and other miscellaneous expenses that you don’t pay if you are renting. First and last months’ rent is also a ways smaller than the typical down payment on a home. Of course, all that has to be balanced off against the fact that no matter how small the principal portion of your mortgage is (and it’s miniscule in the early years), as long as the market is stable, and you’re not looking to make a quick sale with the hopes of turning a profit, homeowners are building equity and increasing their net worth with every mortgage payment. This tips the scales in the whole own or rent conundrum. And when you sell your principal residence one day, the money you earn is tax-free.

It’s a wonderful life

When I was in my 20s, I lived in a neighbourhood that was suited to a single girl hell bent on a good time. Back then, renting was the perfect solution: one of limited responsibilities and commitment. If a window broke, I called the landlord. If the fridge stopped working, I called the landlord. Renting is virtually a worry-free existence. (All this is assuming you have a decent landlord). Home ownership is a responsibility that also brings a ton of warm, fuzzy feelings. It means you can put down roots. You have complete control of your environment so, yes, you can paint your living room red.

Location, location

Buying a home in a neighbourhood you don’t know well is one of the top mistakes homebuyers make. If you’re new in town, you may be better of renting for six months or a year to get a feel for the area. If you like living there, you’ll feel much more comfortable signing on the dotted line later on.

Steady as she goes

Your employment prospects should be pretty stable before you consider buying your own home. Home ownership requires a number of regular payments – the mortgage, property taxes, utilities, maintenance and insurance. Missing any of these payments can trigger dire consequences. There are a number of financial factors that will weigh in when it comes to the own or rent question. But the decision involves much more than just running the numbers. You’ve also got to look at the emotional rewards and challenges of each alternative.