Toronto House by Ocad123

The decision to buy a property is in the majority of cases taken after thorough consideration of all the feasible alternatives that are out there. One of the dilemmas that many people have before taking the final step is whether buying is actually a better solution than renting. The question is especially difficult for first-time homebuyers and families with no previous experience when it comes to these two choices.

Considering Costs

First of all, your future plans should take priority over any other things because if your future is not certain and you'd like to move within a few years, you will find it very hard to recover the closing costs of buying a home. In this particular case, the best solution is to rent until you have more permanent plans. When purchasing a house, you will have to pay a down payment as well as various closing costs, legal fees, etc. Moreover, you shouldn't forget that many other additional costs will accumulate once the process of buying is over, such as tax, insurance, utility payments, landscaping, upkeep, repairs, and renovations. On the contrary, renting doesn't require paying property taxes or other expenses such as utilities because they are usually included in your rent. However, the problem with renting is that it's often viewed as throwing your money away and even more concerning today is the possibility of rental increases that could weigh heavily on your budget in the long run.

House by John Vetterli

The current trend in Canadian cities is a rise in house prices that is much faster than rent. In other words, house prices over the past decade have substantially outpaced rent growth. Such a development may have detrimental consequences if the trend continues over a longer period of time and it may finally lead to a housing bubble, just as it happened in U.S. real estate a few years ago. One of the reasons for this disparity between house prices and rents is the so-called "ownership premium." This happens when people look favourably upon real estate as an investment, which the price of houses to increase faster than rent for a time. In other words, if people prefer owning a house just because they consider renting throwing away their money, they often make irrational financial decisions such as purchasing a home when an equivalent home can be rented for substantially less than ownership costs.

In general, there are many cities in which it's still better to rent a dwelling and build your equity by saving the difference between your rent and your ownership costs. The truth is that such a decision is all too often overshadowed by the prevailing stigma according to which throwing money away on rent is the worst decision that one can make.

The fact that house prices have significantly outpaced the price of rent shows that a number of unsustainable factors are out there and so there are rising chances of significant price corrections in the years to come, especially in places like Vancouver and the Toronto condo market. That's why any of the above mentioned decisions should be very carefully considered before you finally take the final step. One of the things that can accelerate your decision-taking process is the calculator for comparing the costs of buying and renting a home as well as the data showing you the most important factors that will influence your choice.