17 Jan Licensed Insolvency Trustee Provides Bankruptcy Advice on the Value of Buying a Home Versus Renting
Reports indicate that just before Canada Day, the Government of Canada launched consultations for a National Housing Strategy. This is in fulfillment of Justin Trudeau’s promise during the last election to develop a strategy to create more affordable housing, make it easier to buy a home and cool down overheated markets in Toronto and Vancouver.
Owning a home is part of the Canadian dream, but is more than just a place for you to raise your family, it is also a financial investment. This blogpost will focus on the strengths and weaknesses of buying versus renting.
However, if you are struggling to pay your mortgage or creditors and need debt help and bankruptcy advice in London, you have come to the right place. McLennan and Company Ltd. has over two decades of experience helping those in London and surrounding areas with debt restructuring, consumer proposals, bankruptcy and more. Contact us today to schedule a free consultation.
Personal and Financial Factors
In deciding to buy versus rent, there are a number of personal and financial factors to consider. While financial experts used to give blanket advice to buy if you could, today that advice is much more nuanced depending on your financial and personal circumstances.
The first expense associated with home ownership that does not exist with renting is the down payment. In Canada, you can obtain a mortgage from major financial institutions with a down payment of at least 5% although you will have to pay mortgage default insurance if the down payment is between 5% and 20%. The first time home buyers program allows you to borrow from your RRSP for the down payment, up to $25,000 per person or $50,000 for a couple.
Monthly mortgage payments vs rent
The monthly payments on your mortgage will depend on the sale price of the house, the down payment, the size of the mortgage and the interest rate. In some cases the monthly payments on a mortgage can be less than the monthly cost of renting in the same location.
Home repairs, taxes
One of the reasons why rent payments can be higher than mortgage payments on a monthly basis, is when you are renting your landlord covers many other expenses. The landlord is responsible for home maintenance, home repairs and municipal property taxes. All of those expenses become yours when you are a homeowner and have to be factored in when you are trying to determine if you can afford home ownership.
Permanency vs. Flexibility
When you own your own home you have a sense of permanency and putting down roots, which can provide a great deal of personal pride and comfort. However, there are high transaction costs with the purchase of a home and some individuals and families may favour the flexibility of renting over the permanency of home ownership. Particularly in a globalized economy, which often requires relocation of city or even country for opportunities, the flexibility of renting may be for you.
As mentioned above, home ownership is also a financial investment. Instead of paying a landlord every month, you are developing equity in your home. Mortgage payments at the beginning primarily cover interest. But over time they cover more and more of the principal of the loan, making paying a mortgage like a forced savings program.
The decision to rent versus buy your home will very much depend on your financial and personal circumstances. If you and your family are having difficulties with debt and need bankruptcy advice in London, contact McLennan and Company Ltd. today.
Here at McLennan and Company Ltd. we focus our work on helping individuals and families who want to start over financially. Contact our head office in London, Ontario at 519-433-4728 or fill out our online form and someone will contact you within one business day to schedule a consultation.
We know that this is a difficult time for you and your family and we offer free initial consultations. For your convenience, in addition to our office in London, we also have satellite offices in Ingersoll and Woodstock and offer flexible appointment times.