Should I buy or rent a home in Toronto?
Should you buy or rent your home in Toronto? This is a question many are struggling with, especially in 2017. If you’re staying in a city for the long-term, owning a home would make sense in most cases, but with the Toronto real estate being so pricey, you may have to sacrifice your ideal lifestyle. Most financial experts recommend spending no more than 35 percent of your gross annual income on housing expenses, but good luck doing that in Toronto.
Here are some factors to consider when deciding whether it makes more sense to buy or rent in Toronto.
The case for buying
Buying a home can be one of the best ways to build your net worth. When you buy a home and take out a mortgage, it’s considered forced savings. If you keep paying down your mortgage, one day you’ll own a valuable asset free and clear. With the Toronto real estate market on a tear over the last decade, anyone who invested early has seen their net worth grow exponentially. With about 125,000 new Canadians coming into the GTA every year, there’s no end in sight for Toronto’s housing boom.
Homeownership also offers a lot more freedom than renting. While you’ll have to ask your landlord permission to paint your place, you won’t if you’re a homeowner. In fact, there’s nothing stopping you from installing a deck or swimming pool. The changes you make are completely up to you as a homeowner.
Furthermore, homeownership offers long-term stability. When you own a home, it’s truly your castle. Provided you keep paying the mortgage, you can stay as long as you want. You don’t have to worry about your landlord providing you with notice that he’s moving.
The case for renting
Renting seems to have unfairly received a bad rap over the years. If you’re a renter, some people consider it second best. While that may have been true in the past, with home prices at about 13 times the average annual wage in Toronto, for some people owning a home isn’t financially feasible.
The biggest advantage of renting is that you aren’t tied down. You can easily pick up and move somewhere else at the drop of a dime. If you get a better job offer on the other side of town or in another province, there’s nothing stopping you from taking it. In most cases, all you need to do is provide your landlord with 60 days’ written notice (provided you haven’t signed a lease). Moving is also a lot less expensive. You don’t have to pay the transactional costs of real estate – land transfer tax, real estate lawyer fees and home inspection. Plus, you don't have to worry about selling your home at the same time as you buy another.
While owning a home is typically a better long-term investment than renting, you can make it closer as a renter. Renting is typically cheaper than owning a home since you don’t have to pay for the maintenance, repairs or property taxes. If you save the extra money from renting and invest it conservatively, you can come out almost as well (sometimes even better) than homeowners.