To rent or buy a home? That is the question many Canadians are asking themselves as the real estate market has proven to be a bit unsteady.
According to Statistics Canada’s 2016 Canadian Census, 67.8% of Canadians own their own home. While this statistic largely represents baby boomers, the increasing rate of home-ownership over the years indicates that more and more people from other generations are switching from renting to buying. Are you ready to become one of them?
If you’ve been thinking of buying in Edmonton, you’re probably aware of rising rents and home purchase prices. You’ve heard that home ownership is too expensive, and in today’s market, renting is your best option.
But is it?
A closer look at the most recent data and the input of trusted sources will empower you to make the right decision for you and your lifetime investment.
The Cost of Renting vs. Buying a Home
Which Is More Affordable—Renting or Buying A Home?
Both renting and buying a home have attractive upsides.
Under most lease agreements, your landlord is responsible for all the maintenance, repairs, and property tax filings.
Your monthly rent is controlled, so the longer you live in one place, the more affordable your monthly payments will be. If you own your own home, it’s up to you to take care of your investment—but either way, you’re paying out-of-pocket.
Your landlord rolls their expenses into your monthly rent, plus a profit—as well they should. And since they likely secured the loan off their existing equity to finance the income property, they’re getting a break on their taxes, too.
There’s a reason that investing in rental property is a wise idea; but if you’re able to secure a down payment and commit to caring for your home, you’ll build equity.
And that equity is valuable.
Will Dunning, Chief Economist for Mortgage Professionals Canada, released a comprehensive report comparing the risks and benefits of home ownership versus renting.
He analyzed two decades’ worth of housing market, wage, and rental data as it applied to 266 case studies.
Dunning concluded that for 76% of these cases, the net home ownership costs were lower than the cost of renting.
“Homeowners are distinctly better-off financially compared to tenants who are similar in age and level of income.
The difference is not just in terms of their home equity: owners have more non-housing wealth than tenants.
This may reflect that because owners have lower lifetime housing costs than tenants, they have more opportunity to accrue other savings.”
Dunning sees monthly principal payments as money in the bank, and he’s correct.
Equity is a form of forced savings that can’t be raided for vacations or short-term financial pitfalls.
This type of savings is long-term and steady.
It can be leveraged for future loans, enabling homeowners to build on their growing investment.
For example, purchasing a rental property and enjoying the financial returns.
Aesthetic Changes & Renovations
Renting Offers Limited Personal Freedom
Renting an apartment or house is an ideal situation for many Canadians. Moving into a rental property requires very little paperwork and almost no upfront financial obligations besides the last month’s rent and a security deposit.
Unfortunately, renters are limited in what they can do in terms of home improvements and renovations.
Renting a house can feel especially limiting as some landlords aren’t willing to put any work into outdoor beautification or upkeep, while others need you to run everything by them before you can even touch the lawn.
Any upgrades your landlord adds to your unit is out of your hands, meaning that you’re stuck with every style choice they make. These home upgrades increase the property value only for the landlord.
Renting vs. Buying a Home: Are You Ready?
When Will I Know I’m Ready to Buy a House?
Purchasing your first home is the biggest investment anyone will ever make.
You might find it difficult to remain objective if you fall in love with a home for impractical reasons, which is why you’re best-served building a team of advisers.
This might include trusted friends and family—people who know you as well as (or even better than) you know yourself, who have home-buying experience, and who can help you ask the right questions.
Professional guidance from a financial adviser, real estate agent, or home builder can help you avoid the pitfalls of ill-informed or poorly-timed purchases.
For instance, if you look for homes with your heart rather than your head, you may be ignoring major warning signs. You need an objective friend or family member to come with you to view a potential property. They can ask the right questions and point out potential issues with the roof, septic system, foundation, etc.
When you have a realistic picture of your purchasing power, your desired Edmonton community, and your must-have home features, you’re in a better position to take the next step toward home-ownership.
When’s the Best Time to Buy Real Estate?
Once you know that you’re in the right financial position and you’ve been pre-approved for a home loan, it’s time to start looking at homes. First, decide whether you’re interested in purchasing an existing home or a new construction home.
The former will likely require more upkeep and upgrades, while new developments are turn-key and often customized. If you’re buying in Edmonton, you’ll have plenty of options either way.
You can visit show homes in development communities at any time, but if possible, begin your search in late spring to early summer.
We all know that Edmonton winters can cover a significant portion of the outdoor features, like the driveway, garden, and pool. But the summer weather is perfect for looking at home exteriors and outdoor features—and for catching any potential problems. Plus, it doesn’t hurt to have your most recent tax return to help with your mortgage approval.
Real estate agents know that spring is the time to market their listings, so you’ll have a much larger inventory from which to choose. More options allow you to see what’s available and what you can afford.
It’s a good idea to know in advance how long the moving process will take, including the possession date, as this will likely affect other obligations. Double-check your lease contract to verify the notice period, and look into quick possession mortgage opportunities in case you find a deal with a motivated seller or a vacant new construction home.
Are You Looking for a Home in Edmonton?
According to 2018 RBC home affordability statistics, Edmonton offers the most attractive cost of ownership than any other major city in the country.
For instance, the average homeowner in Edmonton will spend 28% of their income on their mortgage compared to a homeowner in Vancouver who will spend as much as 88%! The best time to invest in Edmonton property is now!
If you’re looking for your dream home in Edmonton, contact us today to find out how we can build a love affair that lasts.
Looking for a no-wait option? Check out our great selection of Quick Possession Homes in Edmonton.
And if you’re not quite sure you’re ready to take the leap, we offer a Rent-To-Own Program to make buying easier!