To Buy or Rent For Your Child Attending University?
After all the sacrifice and long hours spent helping your child with their homework, the day has finally come: your kid is going off to college or university. But with the price of tuition, books and groceries, the next question parents often ask is whether or not its better to rent a home for the post-secondary-age child, or buy.
There are a number of pros and cons to each side of the debate. Buying a home certainly has its benefits. For one, it gives you the chance to build equity while offsetting some of the prices for child's education.
The cost of attending college or university out of town can be quite daunting. The website RateSupermarket.ca says it costs $35,435 to live at home while earning a four-year university degree, and $78,817 when living away. Their study found that the average university student graduates with close to $28,000 in debt and takes an average of 14 years to pay it off, based on an average starting salary of $39,523.
Student reading a newspaper by hobvias sudoneighm
Weighing Your Options
Buying a home can offer a sense of stability for a child who is leaving the nest for the first time and help avoid the stresses that comes with trying to rent a new apartment each school year. Purchasing the home also gives you the chance to find a suitable neighbourhood and living situation.
But also consider that it might be hard for a university-age student to stay in one place for the duration of their education. Renting can offer more flexibility if the student decides they don't like their roommates or if they want to study abroad for a semester.
We should also remember that kids will be kids, and not having to worry about the maintenance of a property can be a benefit. Still, managing a property can be an excellent lesson in personal responsibility.
This isn't a one-size-fits all situation. Parents need to discuss the options with their children to make sure everyone is on the same page.
U of T Spectators by Benson Kua
Knowing the Market
It's important to take stock of the housing market where your child's school is located.
Interest rates are relatively low right now, but prices in a city like Toronto can be restrictive to families who already have one mortgage to pay. But houses tend to be more affordable in other markets like Waterloo or Peterborough and renting out other rooms in the home can offset mortgages and allow you to save on the price of your child's rent.
There are also a number of resources online to help with your decision like online "buy or rent calculators." (http://www.getsmarteraboutmoney.ca/tools-and-calculators/buy-or-rent-calculator/buy-or-rent-calculator.aspx) Potential home buyers should also look at Canada Mortgage and Housing Corporation rental market statistics to get an idea at how strong the market is there. You can also check your university or college's off-campus rental office to help get a grasp on things.
University of Toronto Campus by The City of Toronto
Know the Rules
Familiarize yourself with tax laws. The rules change when dealing with a rental property.
In Canada, homeowners can sell their principal residence without paying taxes on any profit or capital gain from the sale. But the exemption doesn't apply to rental properties. If you see a profit, you could pay as much as 50 per cent of the capital gain. Make sure you speak with a registered accountant before making your decision.
There is also no guarantee that the home will appreciate in value by the time your child dons the cap and gown. Always weigh your options before committing to any major purchase, but especially property.