Renting a Home Versus Buying a Home in Toronto

You may have heard people say that renting is just throwing your money away, but that’s just not true. People rent for all types of different reasons that make more sense then buying a home does, none of which are really throwing your money away. The bottom line is that sometimes it makes sense to buy, and sometimes it makes sense to rent. Here’s why:

When Renting Makes Sense

• When you don’t have your downpayment saved up – This one is obvious, because if you don’t have a downpayment saved, then you can’t buy a home. With the average home price in Toronto being around 700K, that means you’ll need to have 35K squirrelled away to get started.
• When you’re unsure about which neighbourhood you want to live in – Renting means that you can live wherever you want, with little more commitment above any lease that is signed. Wonder what it’s like living in Dufferin Grove, Roncesville, Parkdale, or The Annex? If you rent, you can have that question answered in the space of just a few years.
• If you have a lot of debt – Chances are that when you buy a home, you’ll be putting most of your money towards the initial costs, home maintenance, and other unexpected costs that come up (and they will). So if you’re carrying around some debt, buying a new home will only make you have to squeeze your paycheques a little tighter. It’s just good advice to pay off existing debt before you take on new debt.

When Buying Makes Sense

• When you’re planning on staying in one place for 3 or more years – With all of the fees, taxes, and costs involved with buying a home, it just wouldn’t make much financial sense for you to buy and sell and buy and sell every year or 2. Of course, the same doesn’t apply if you’re planning on buying and flipping for a profit.
• You have enough for the downpayment in your savings account – If you have enough saved for a downpayment, even if it’s the minimum 5%, it might make sense to buy.
• When you’re prepared for the responsibility – Whether it’s financially, mentally, or even physically, buying a home is a big responsibility. If you think that you’ve thought it through and worked out that you’re ready to take the plunge, then it might make sense to buy.
• You have a stable job – If you’ve just accepted a new position at a new company, it might not make sense to buy, and you might not even be able to get approved for a mortgage anyways. But if you’ve been at your job for awhile and you have a certain level of stability, it might make sense to buy.
• You have a lot of patience – Right now, Toronto is a seller’s market, so if you do start looking for new homes to buy, you can expect bidding wars, headaches, and even that you’ll lose out on what you might think is you dream home. It’ll take a lot of patience on your part to get through it and eventually buy that perfect new home.

Everyone is Different

Of course, everyone’s situation is unique, and buying might make sense for some, while renting might make sense for others. It’s best to think about yourself, what you can afford to do, and what makes sense for your specific situation.