3 Reasons to Switch From Renting to Owning
Are you currently renting, but are seriously contemplating making a move into the world of homeownership?
There are plenty of reasons why people may rent instead of buy. For starters, it's easier to get a lease than to get approved for a mortgage. There are plenty of added steps and criteria involved in the home loan process and real estate transactions compared to signing a rental agreement.
Renting can also be more affordable. After all, the only thing you have to worry about is your rent, rather than all the added expenses that come with owning and operating a home (though the costs may not be as significant as you think, which we'll get into later).
But truthfully, there are several reasons why you may want to change your status from "renter" to "homeowner."
1. To Build Wealth
Every rent cheque you provide to your landlord goes towards building their wealth, not yours. While your monthly rent payments ensure that you have a roof over your head month after month, they do nothing to build any equity for you. Instead, you're paying off your landlord's mortgage for them and helping them build long-term wealth at the same time.
A good reason to make the switch from renting to owning is to ensure that your monthly payments go towards your wealth building rather than someone else's. Not only will you be paying off your own mortgage and building equity in your home, but you'll also own an asset of value that will appreciate over time. That way, you'll be building equity both through regular mortgage payments and an increase in your home's value.
If you ever sell your home at some point, you can recoup significant profits if you've been diligent with your payments. Alternatively, you may also be able to tap into the equity in your home and borrow against it if you ever need a large sum of money to cover a large expense.
2. To Ensure Consistent Monthly Payments
The rent you're paying now won't necessarily remain the same going forward. Landlords typically increase monthly rents to reflect inflation and an increase in costs associated with maintaining a property, and they'll pass those extra expenses onto you in the form of higher rent.
While landlords are limited in how much they raise rents, they're still allowed to do so every 12 months. That means your monthly rent will most likely be higher year after year.
On the other hand, once you lock in a mortgage, your monthly payments will not change until you renew your loan. Unless you choose a variable-rate mortgage, you can rest easy knowing that your monthly payments will remain the same, regardless of inflation. Consistent monthly mortgage payments are easier to budget for.
The thing is, rents have skyrocketed over recent years. In fact, it's not uncommon for monthly rents to be just as high — if not higher — than mortgage payments, depending on the cost of the home and the down payment amount.
Right now, the average rent for a 1-bedroom unit in Toronto is $2,040. And if you want to rent a house to suit a growing family, you could easily be paying at least double that amount, and much more in many cases.
Instead, you could lock in a set monthly payment for up to 30 years and not have to worry about it increasing over the loan term.
3. More Flexibility
As a homeowner, you'll have much more flexibility with what you do with your home compared to renting.
When you're a renter, you're at the mercy of your landlord when it comes to any changes or updates that you'd like to make to your home. For instance, you may need to ask permission to hang a TV mount, for example. You'll also need permission if you choose to conduct some business at home, especially during these times of remote work.
Instead, owning your home offers you the freedom and flexibility to do with your home what you please. If you want to change your front door or update your kitchen cabinets, you're free to do so without having to ask for permission.
Flexibility is one of the bigger reasons why people decide to own rather than rent.