Going out on your own is always a colossal step into a new chapter. Yet, the question remains: As a first timer, should I rent, or do I buy? Some believe that renting is the only option, especially in a city such as Vancouver with rising living costs. However, even in today’s market, buying a house can be a realistic alternative.
The decision to buy is often due to one or many of the following reasons: cost, space, location, and amenities. For some, the cost of buying a house and feeling trapped by a large mortgage is too big of a risk, but for others, it’s worth the investment.
For those swaying towards renting, the idea of being able to stay in a central location such as Downtown Vancouver, where house prices are considerably higher than elsewhere is often a deciding factor. Maybe they want the flexibility to try out new neighbourhoods before making a decision (A few years in Mount Pleasant, followed by a stint in Strathcona). Others may choose to reduce costs by having housemates and splitting rent with a small group of friends – this is much easier when renting. Or maybe they want to take their time with savings for a down payment affording them a larger home at a different life stage and in an area that ticks the boxes.
However, as it often the case for the majority of first-time buyers, saving for a 5-10% down payment is often a stretch without the help from a partner or parents, or both.
There are many valid reasons to consider when deciding to rent or buy. To answer this question, let's break it down by the pros and cons so that the decision can be crystal clear.
Pros of Renting:
- Little to no maintenance responsibility to the place
- Few repairs that will come out of pocket for the renter
- Lower upfront costs – one months rent deposit, moving costs and you’re in
- Safeguarded from any potential downturn in house prices
Pros of Buying:
- Freedom to add a personal touch to the home
- Building equity in a secure manner as you pay down the mortgage
- Ability to create a secondary source of income through renting rooms or a basement suite
- A peace of mind from being in control of your investment and owning the place you get to call home
As you can see, the main difference relates primarily to costs and responsibility. If an individual can save for a down payment, is set on a particular location and prefers to have more control of the situation, they should consider buying property.
Yet, for an individual who wants to take more time to save or invest elsewhere, wait for the right life stage or live without the added responsibilities that comes with home ownership, they should consider renting.
Cons of Renting vs. BuyingNow, here is the other side to the deciding factor when choosing to make either a security deposit or a down payment: what problems you would likely to have at your residence. Here are the downsides to renting and buying:
Cons of Renting:
- Monthly payments may increase
- Potential of lease no being renewed resulting a surprise home search
- Paying someone else’s mortgage without building your own equity
- Requiring permission to paint or remodel
Cons of Buying:
- Additional costs relating to home maintenance
- Responsibility for ongoing costs – interest, taxes, insurance and strata fees if applicable
- Full responsibility relating to things that previous owner to disclose
- Risks of losing home value when you decide to sell
Again, the main differences between the two are cost and responsibility.
If you’d rather have increase flexibility in deciding where you want to live, or would rather skip any surprise maintenance costs, increasing strata fees, and the risk of losing value in a home, then renting maybe for you. Alternatively, if you have access to a down payment, have an idea of the location you'd like to buy, want to be able to grow in a home without the uncertainty of lease terms, or want to build equity for future planning, then buying might be for you. While making the decision to purchase in a desirable city such as Vancouver is by no means easy, if you’re willing to make a few concessions such as spending more time saving for a down payment, considering purchasing a smaller property, or relocating to the highly popular suburbs such as Port Moody, Coquitlam or Burnaby, then buying may well be in reach.
If you'd like to discuss purchasing your first home - whether it be looking at properties in your price range, exploring new neighbourhoods, chatting about different buildings or simply better understanding the process - contact me. I'd be more than happy to schedule a call to answer any questions you may have.