When you're a renter, it can be scary considering your first home purchase. Many factors can make people fret about whether and when to buy. These are emotional issues, yet applying some logic can clarify which way to go and give reassurance that you've made the right choice for rational reasons.
Renting has advantages that should not be dismissed. A renter can often give 30 days' notice and walk away at little or no cost. Even leases usually allow a tenant to leave before the lease term expires, as long as the renter pays the cost of re-renting, and subject to a new renter taking over the suite. In short, renting gives you flexibility.
However, renters can be asked to leave a suite if the owner (or an immediate family member) wants to live in it himself, or if a building is to be converted to condominiums. The knife of flexibility cuts both ways, giving renters some freedom, but always threatening them with being told to move on.
In terms of cost, renting often comes out ahead at first glance, in that rental suites usually cost less per month than buying a condominium home. But as a class, rental apartments are of a much lower standard than condos. And if you rent a condo from its owner, or rent a top-quality apartment, the monthly cost will often match and could exceed the cost to buy. In short, you get what you pay for, but unlike a buyer a renter never builds up any value to show for years of faithful monthly payments.
While bare monthly rental costs may be lower than buying, rents will continue to go up with inflation and market pressures, whereas once you buy a place of your own, the cost of your mortgage payments can be locked in for five or even 10 years. Inflation then becomes your friend, rather than your enemy. As your wages rise and property values rise, the largest portion of the monthly cost of your purchased home remains frozen. After five years of ownership, a high-quality condo could be costing the same or less than renting a much lower-standard rental suite.
Redecorating options are limited for renters. While a condo owner can paint, wallpaper, lay tile or make whatever decorative changes s/he wants, the renter needs, but rarely gets, permission for any changes. Yet if a renter does make improvements, they become the property of the suite's owner, and can't be taken along when the tenant moves. 'Hardly seems fair.
Fear of unemployment keeps some people from deciding to buy a home. It's a real concern that we might lose our job and not be able to pay our mortgage and other monthly costs of ownership. Yet doesn't that apply equally to a rented home? In either case, no money means no place to live in short order. In both cases, we should always have some cash in reserve in case of employment problems. In both cases, we would face moving into Mom's basement in a disaster scenario. The greatest long-term security comes when a mortgage is paid off. It takes time, but eventually it happens, insulating you against disaster through a greatly reduced housing cost.
If you decide it's time to buy, your largest barrier to home ownership will be the down payment. That alone makes continuing to rent a necessary choice for most tenants, even if they'd rather build value, enjoy stability and take pride in a home that is truly their own. It's simply very hard for many people to accumulate the thousands of dollars necessary to enter the world of home ownership. Yet from reducing expenses to save money, to borrowing from your own RRSP, to asking Mom or Dad or Grandma for a cash gift, there are options to explore.
The family gift, by the way, is often overlooked. Don't let pride stop you from discussing with family that you're ready to become a homeowner, but face barriers. Grandma might not give you $10,000 to buy a car or go to Europe, but she might be impressed that you've made the difficult and responsible decision to stop renting and own a home of your own.
Calgary Condominium Directory
