Hey, it’s OK to rent

The age-old debate of “to buy or rent” goes hand in hand with wondering which came first: the chicken or the egg? It’s a debate with a laundry list of pros and cons for both options and most of us just want to know: what’s better, buying or renting? According to finance expert Pattie Lovett-Reid, it depends.

If you have an adequate down payment and budget correctly, buying a house can be a great investment. While you pay down your mortgage, you’re building equity, potentially increasing the value of your investment over the years.

Let’s be real though, home prices in most urban centres are trending upwards, and home ownership is not necessarily within everyone’s reach. Let’s take a look at what’s in it for the renters.

Cheaper living expenses

The days of “your mortgage payment is less than your rent” might be over. In fact, in some situations, you could save money by renting. If you find that you’re saving money while renting, and you’re trying to decide if now is the time for you to buy, think about your goals for the coming years. Are you still going to be able to contribute to your RSP, or will your new mortgage take centre stage in that budget app? There’s really no right or wrong answer to this question, but it’s an important one to take into consideration.

Wanderlust

Ask a digital nomad and they’ll tell you - putting down roots isn’t the goal for everyone. Want to work remotely from Europe for a few months? If you’re a renter, it’ll be a lot easier to do than if you’re carrying a mortgage. Speaking of work, renting gives you more flexibility to relocate for work, or work remotely in a different city.

Don’t blow it up

Renting can be a keen way to avoid lifestyle inflation, the phenomenon of gradually allowing your spending to increase as your lifestyle becomes more extravagant. By renting and keeping your space on the small side, you might avoid the slippery slope of lifestyle inflation. Not only that - less space means less for you to manage and clean.

Expect the unexpected

Unexpected expenses like a broken appliance or annoying leak aren’t up to renters to fix, while homeowners will have to foot the bill. If replacing a broken fridge doesn’t seem like a cost you can manage without dipping into high interest debt, renting might be for you.

No condo fees

This one’s fairly self-explanatory. Condominiums are becoming a more common option for first time buyers, and condo fees are part of the package. Condo fees can average between $0.50 to $1.00 per square foot, depending on the province you live in. While you’re weighing the pros and cons of a rent vs buy scenario, make sure you factor in this additional cost.

The bottom line?

It's ok to be a long-term renter, as long as you make sure you are covering your financial bases in the same ways that a buyer does. If you’re unsure if it’s time to make the leap, consult a mortgage calculator to get an estimate of your cost to carry a mortgage. Try to budget for a few months as though it’s your reality, and try putting the additional funds in your TFSA. Reassess after those months to see if renting or buying might be right for you.