A question that pops up quite often with regards to real estate is whether you should rent or buy your home. The reason why this question is so common is because people want to ensure that they are making wise choices and investments. Let’s look at this question in more detail.
Scenario A: Buying
Let’s say you purchase a property and acquire a mortgage to finance it. Your costs of owning your new home will likely include:
- Mortgage Payments
- Mortgage Interest
- Property Taxes
- Home Insurance
- Maintenance/Repair costs, etc.
A key point in purchasing is that your monthly costs will contribute to building home equity. As the years go by, a larger portion of your mortgage payments will go towards paying off your mortgage instead of paying mortgage interest. If you're thinking about buying you should also consider the type of property that would best suit your needs, and you should also think about the age of the property. Are you buying brand new, or something older? Click here to read my post on buying new or old!
Also, as the owner of the property, you would be able to reap the benefits of any increases to property value if you were to decide to sell it in the future (keep in mind that rising property values may also mean rising property taxes). With the rise of Vancouver property values over the past few years, many local homeowners have been able to sell their homes at a great price, netting them a good return on their initial investment.
Scenario B: Renting
Alternatively, let’s say you decided to rent a home instead. While some would say that renting money is like ‘throwing away’ your money since you’re not building home equity, there are those who would disagree. The cost of renting is usually lower than the combined costs of home ownership. Assuming that your income is identical in both scenarios, this would mean that you would have some ‘leftover’ money. The idea is that you would then use these funds on other investments.
Unlike Scenario A, some people prefer not to ‘hope’ that property values will have risen (or at least not fallen!) by the time they decide to sell their home. For this reason, they may decide to take a more personal and direct approach by setting aside funds for other investments.
Of course, there are other factors at play besides which Scenario would be more profitable. For example, if you own your home, you won’t have to worry about receiving a notice from your landlord saying they want to use their property again. As another example, if you rent, it tends to be easier for you to move away if you are unsure about how long you will be staying in one place. Working with an experienced real estate professional can help you determine if buying is the right choice for you.
Should you have any questions about buying a home, or would like to discuss your real estate plans with a local and experienced Vancouver realtor, get in touch with me by phone at 604-889-8609 or by email at firstname.lastname@example.org.