Does Buying a Home Cost More Than Renting?

If you are currently renting, you might wonder if you could possibly afford to buy a home in a nice neighbourhood. There are many expenses that come with owning a home and with owning a condo, but there are many benefits as well. This guide will help you weigh the various costs related to renting and buying, so you can make an educated decision.

What Costs Are Associated With Ownership?

Friends and family members might encourage you to compare the monthly mortgage payment to the rent payment alone, but there are a number of costs related to homeownership that you should know about. The first and most obvious is the down payment and closing costs to buy the home in the first place, be it in Bayside or elsewhere. You will need at least 5 percent of the home price, and possibly more. As a property owner, you are also expected to pay property taxes, insurance and for all maintenance. This comes on top of the mortgage, which may change in monthly payment requirements over time, depending on the type of mortgage you have. You must also pay for any upgrades to the property, and to sell it if you decide to move.

How Much Does Renting Cost?

Like owning a home, renting has unique expenses. Besides the monthly rent payment, you may be called upon to provide a deposit to cover cleaning the unit, or if you quit the lease early. You can expect a predictable payment during the period of the lease, but your landlord could raise the rent after the lease term is up. Maintenance for the property is generally shouldered by the landlord, but you may be expected to cover some of the costs of utilities, as well as anything that breaks down above normal wear and tear.

Could Buying a Home Be Less Expensive?

The total cost of renting compared to buying a home depends almost entirely on the local real estate market. Rent tends to be higher in areas where the home prices are high, but you will see some variability. Homes located in the suburbs are often less expensive than renting a home or apartment in the urban city center. If you are willing to trade for some conveniences like proximity or access to public transit, you might be able to buy a home and pay for it with less money than rent in a different location. These numbers can also vary quite widely depending on average mortgage interest rates and the type of mortgage you might choose.

Are There Other Reasons to Buy a Home?

Ultimately, a lot of people want to buy a home because the payments go toward something they will own and could sell later on. When you rent, you may have lower expenses, but every payment simply pays for your housing at the moment. In short, rent only helps to pay someone else’s mortgage. However, in order to buy a home, you need to be able to make the down payment, mortgage payment and all related costs. Fortunately, there are many calculators available to help you decide if buying a home might be more economically practical for you at this time.

Deciding whether to buy a home or continue renting requires extensive research into all the relevant costs. If you have some money you could invest up front, and you can shoulder a higher rate of irregular expenses, you might be able to afford a home with payments similar to renting.