It’s a phrase that has been uttered by millions of Realtors, mortgage brokers, and well-meaning parents or relatives over the years.
"Don’t rent. You’re just throwing your money away."
The logic goes something like this. When paying a mortgage, at least a small portion of the payment goes towards principal. As the mortgage balance diminishes, this amount goes up.
Renting isn’t like that. Every nickel of a rent cheque goes back to a landlord. Thus, many people immediately label renting as the inferior option.
But it isn’t quite that simple. Owners often take huge financial risks when they buy, especially when using minimal down payments. If you put down 5% on a property and values fall 5%, the down payment is gone. Renters don’t have that risk.
Renters also don’t have to pay expenses like maintenance, insurance, or property taxes, costs that are often ignored by homeowners just looking at the difference in monthly payments. If a renter’s stove breaks down, all they have to do is call the landlord. If an owner’s stove stops working, they’re paying money to fix or replace it.
A renter also has much more flexibility than a buyer. Most renters can be gone in 30 days, especially those on monthly leases. There’s no telling how long the selling process could take, especially in a tough market.
The bottom line? Both renting and buying have their perks. In markets like Vancouver, Toronto, or Montreal, where renting is often cheaper than owning and house prices seem poised for a crash, renting could very well be the better decision over the long-term.
