Rent or buy?

Rent or buy?

When it comes to staying put in your rental or taking the leap and buying a condo, how do you decide what’s best for you? Start by asking yourself these 5 questions:

1. Can I afford the (actual) costs of buying a condo?

It’s important to consider ALL the costs: there are more expenses to consider than you might initially realize. On top of more obvious items like your down payment and your mortgage payments, you’ll also need to factor in maintenance fees, land transfer taxes, property taxes, legal expenses and more.

Related info: Don’t get surprised by closing costs

At first glance, renting a condo costs less than owning one: your monthly rent payment will likely be lower than a mortgage payment would be - especially now, with Toronto rentals being a better deal than they’ve been in years. And it's cheaper in other ways, too. If you have a broken sink, there's no need to spend your own money to fix it. Just call the landlord. The building’s windows need to be replaced? That cost wouldn't be passed on to you, either. It comes out of the maintenance fees the condo’s owner pays.

Related info: Big incentives for Toronto renters

But remember, while your monthly costs will probably be lower as a tenant, at the end of the day, you’re paying down someone else’s mortgage. If renting is the right choice for you in the long term, great. But if you do intend to buy eventually, jumping in sooner rather than later is a good idea: condo prices are down right now, making it a great time to buy. And despite blips in the market, property values in the city historically keep going up over time.

2. What are my long-term goals?

What do the next 3 to 5 years look like for you? Maybe you’re thinking of applying for that job in Paris, or you’re not sure if you want to settle in Toronto long-term. If there's uncertainty in your near future, continuing to rent is probably the smart choice here. After all, it’s easier to end a lease than it is to sell a property.

But if you’re ready to plant roots and take on the responsibilities of owning a home, buying a condo is worth considering. Even if you don’t think it will be your “forever home,” if you stay long enough, you’ll reap the rewards of appreciation and growing home equity. Learn how much it could cost you to wait instead of buying now.

Couple managing their debt

3. How much and what kind of debt am I carrying?

If you have a bunch of high-interest loans, pay 'em off first. Lenders look closely at the amount and type of debt you have when considering you for a mortgage, and a lot of credit card debt or other high-interest borrowing sends up a red flag. They want to know you can pay off your mortgage, and having credit card debt with 28% interest will probably hinder your ability to do that.

4. How do I feel about risk?

There are risks to both scenarios. If you’re a renter, your financial risk is low: all you’re responsible for is rent. But the risk to your stability is higher because being able to stay in your home depends on someone else. If your landlord wants to have a family member move in or they decide it’s a good time to sell, you’re out of luck...and out of a home.

For buyers, it’s the opposite. Owning your home means stability: if you keep paying your mortgage, no one can kick you out. But buying a home for the first time is a huge financial commitment: some people might see that as a risk. And with condo values dropping during the pandemic, there’s fear you’ll lose money by buying.

If you look at GTA numbers over the years, however, property values have gone up consistently, despite economic fluctuations. The key is to look at your purchase as a long-term investment. Prices may go up and down year to year (and we get it, right now things are feeling a little iffy) but if you wait it out for 5 or 10 years, your property will appreciate. (Plus, even if you do sell for less than you bought for, you’ll still recoup most of your investment, while rent is money you’ll never get back.)

5. How much freedom do I want with my home?

Do you love to renovate and decorate and constantly evolve your space? When you rent, you can’t do anything to your place without your landlord’s permission, and even if you have it, you'll probably have to get it back to the original shape when you leave. Plus, costlier stuff like putting in laminate floors or replacing fixtures is money you've sunk into someone else's property. Apart from the enjoyment you get from the upgrade, you probably won't get a penny back.

When you own a home, however, you’re the boss. You get to make the decisions. Want to paint your bedroom black? Go for it. Install new kitchen cupboards? You can! And what you pay can be an investment in the value of your home.

Is home ownership right for you right now?

Check out our First-time buyers hub: there’s a ton of helpful info about buying a GTA condo, from figuring out how much you can afford, to assembling a great team, to navigating bidding wars. And you can talk to a Condo Pro anytime: we’re always happy to answer questions, help you run the numbers, and guide you to the neighbourhoods, buildings and layouts that will give you the best value for your money.

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