There are certainly benefits to owning your own home. You can make payments toward a long-term investment, make any changes or upgrades you desire, and have a stable place to call home, just to name a few. What is not always so clear are the benefits of renting. Not everyone is in a position to buy a home and sometimes it just makes more sense to rent. It would be a smarter financial decision to rent temporarily before buying a home you’re not ready for. Here are some circumstances in which it makes more sense to rent.
When does it make more sense to rent? You may want to rent if…
You’re not sure which neighborhood/city/province you want to live in.
Location is a large part of purchasing a home. When you buy a home, you’re not only investing in the house itself, but also in the idea that you’re geographically set for a relatively long period of time. Renting is still a time commitment as you do have to stay for the period of your lease, but that usually only consist of about one year. You could rent homes in a few different locations over a few years to decide where you like living before making a commitment to stay.
Moving when you own a home is a little (or a lot) more difficult than moving when you rent. Usually with rentals, there is a set lease term for which you are required to pay rent. After that, if you decide you want to move, you’re free to go and sign a new lease elsewhere. If you decide you want to stay, you can look into options to re-sign your lease before the owner looks for new tenants. On the other hand, most people are unable to move from a home and financially afford living elsewhere until they sell their current home. In British Columbia the Property Transfer Tax you paid when buying your home is also something to think about. Selling a home can be a long, unpredictable process and leaves far less flexibility if you think you want to move. Life is not always linear, and that’s okay. So if you think there is a likely chance you’ll want to move in the next few years, look into renting first.
You don’t have the money for initial home-buying costs.
While in the long run it does make more financial sense to pay a mortgage instead of paying rent, there are a lot of other up-front costs involved with buying a home. Those include the down payment, closing costs, costs of furnishing the home, insurance fees, property taxes, and moving costs. If you don’t have savings to cover these many up-front responsibilities and still afford your mortgage, renting can be a better option in the meantime. When you rent, you usually do have to make a down payment (which is generally equal to one month’s rent), but there are few other up-front costs. You could rent while saving money for a period of time to prepare yourself for home ownership in the future.
You don’t have the finances to maintain a home.
It can be very costly to maintain a house over time. When you rent there are many upkeep and maintenance issues that your home owner or leasing company is responsible for. Renters generally don’t have to worry about replacing large appliances, patching holes in the roof, or repairing other parts of the home after normal wear and tear. Aging damage to a home is inevitable and becomes a constant cost for homeowners.
Overall, there are many pros and cons of both owning a renting a home. If you’re not financially equipped or ready to settle down geographically, renting just might be the best option for you.