In order to make the most of your monthly income, renting vs. buying a home is something you should consider. You might need to be flexible about what is best for you now because your priorities will change over time. However, at any stage, it’s essential to maintain good financial health. If you don’t prepare, you could find yourself in a difficult situation.
Home Ownership – A Positive Long-Term Investment
When it comes to finances, buying a home is the most lucrative and vital decision most people will ever make. Be sure to make wise decisions while purchasing your home. It will grow in value over time and deliver good returns on investment.
When you invest your money in real estate, it tends to do better than other investment options. It for sure beats inflation. For example, you may be spending $100,000 on a house now, intending to decrease the mortgage payments until it is paid off. Ten years from now, that sum won’t have the same value if inflation continues to climb at its current rate.
Most mortgages last around 25 years and, once your initial payments are over; you no longer have to worry about rent. You’ll also be able to pass on a valuable resource you’ve built up over time, adding to your family’s wealth.
Home Ownership – Tax Benefits
One of the abundant benefits of owning a home is tax savings. You can deduct the amount of your mortgage interest and property taxes from your federal taxable income. If you’re getting a return of $1,000 on your mortgage, it’s better to keep your house (from a tax standpoint) than if you rented out that space.
When you have a mortgage, your monthly payment is likely to stay the same. The interest rate may increase or decrease due to market conditions, but this is rarely the case.
If you continue paying $2,000 a month in 2020, that amount will remain unchanged in 2030. If you had rented during this period, your rent might have tripled in the same time.
Renting – Minimal Deposit
Typically, when renting a property, you will pay a small deposit based on national standards. If you buy a home, the deposit on your mortgage will be based on the entire value of the property. A $150,000 house might require as much as $25,000 for a deposit.
This all can make buying a home intimidating, but don’t get discouraged by it. A lot of people owe the same amount on credit cards. Despite the challenges, they still make an effort to pay it off. Certain mortgage providers allow first-time homebuyers to save their down payments in a unique, tax-free account (such as an RRSP or TFSA).
Over time, you will demonstrate your ability to make steady payments. The lender will be more willing to finance a home in which you want to purchase.
This type of account can also help you save on your mortgage, so start putting money back today.
Renting – No Maintenance Responsibilities
Homeowners are responsible for all repairs and all maintenance. On the other hand, when you rent, the landlord will deal with any needed repairs. You don’t have to worry about the financial strain from regular wear and tear. It’s also worth mentioning that you don’t have to develop any special skills for maintenance.
Renting – No Housing Crash Stress
Renters will not be affected by housing crashes unless their landlord attempts to raise the rent to recoup their losses. If you’re looking to purchase a home, it is crucial to be cautious and avoid buying at the height of a bubble. If you see prices rising faster than usual, it’s better to wait until they drop back down. It’s best to consult with an independent financial adviser that you trust, who can inform you about if the property market increase is sustainable.
Renting – Cheaper Insurance
Renter’s insurance is cheaper than Homeowner’s Insurance. As a homeowner, your property insurance protects the value of your home. As a renter, your coverage ensures that you can replace the items in your apartment, should you need to, which is why you can get renters insurance for just $18.
Renting – Easy to Relocate
Let us say you just rented a new property, with conveniently smooth access to your workplace. But a few weeks in, it becomes a headache to reach due to new development; you can move. Or maybe you live next door to neighbors who are notorious for partying until 3 a.m. every weeknight; you can move. When you invest in a home, it slows your response time. When moving, you’ll have many more significant challenges, the main one being to find a buyer.
Rent-to-own homes are an affordable way for people without immediate savings to own their homes. Properties advertised as being in this category are usually ready to start planning the purchasing process on the day you sign. Sometimes an opportunity to acquire a home develops after you build a relationship with your landlord. They may have been considering selling, but they might be more comfortable with the idea now because of your treatment of the property. Even if you think renting to buy is not for you, do ask your landlord about the possibility.
Rent-to-own homes aren’t for everybody, though. The best way to decide what you want is to look at your needs, wants, and budget. New or used, large or small – whatever fits with your situation should be the decision that will serve you.
Lease-Purchase vs. Lease-Option
There are two types of rent-to-own arrangements at the moment – lease option and lease purchase. A lease-to-own option provides the ability to purchase a home when your lease is up. If you lease-purchase a house, you have to buy it at the end of the agreement period.
If you want to purchase a home, your dreams can become a reality. If you’re starting in the world of homeownership, make sure to take advantage of all opportunities that might bring down the cost. Use a rent vs. buy calculator to track your finances at every stage of life.