It's 2022.  

House, food, and gas prices are constantly rising in Central Alberta and all over Canada.  

On top of that, there are rising bank interest rates, an ongoing global pandemic, and a still recovering economy.  

With all these things, have you ever asked yourself whether it is better to buy or rent a home in today’s real estate market? 

Both owning and renting have their pros and cons.  

For some, renting is like throwing money down the drain and you’re just paying off someone else’s mortgage. However, others argue that they would never give up their flexibility and be tied up in one place. 

So, how do you know when you’re ready to take the plunge this 2022? 

 

Exhibit A: Owning 

Let’s talk about owning first.  

The knee-jerk answer to why owning is better is that your money is definitely going somewhere. You’re not “throwing away your money down the drain” by giving it to your landlord. 

Every payment you make takes you one step away from your loan and you are consistently building equity.  

You can use the equity you build in your home to get a cash-out refinance, a home equity loan, or a line of credit. 

Moreover, tax credits help offset some of the cost of homeownership.  

Jean-François Perrault, chief economist at Scotiabank, explained that the Government of Canada exempts the value of your primary residence from capital gains tax.  

“The challenge with renting instead of owning is that there is a significant tax advantage to accumulating capital gains in your house versus accumulating those in various types of investment vehicles.,” Perrault said.  

Besides financial factors, when a house is your own, you can freely decorate it the way you want. You get the opportunity to style your home according to your personal taste and that is totally empowering.  

You also don’t have to worry about your rent increasing due to the fluctuating housing market.  

What are the downsides of owning, on the other hand? 

One is the upfront cost. You also have to pay for maintenance, taxes, and insurance.  

If something comes up and you need to move, having a mortgage will make it difficult because there are financial penalties when you break a mortgage and taxes to pay whenever you sell your property. 

 

Exhibit B: Renting 

As previously mentioned, renting is more flexible especially when your lifestyle and job doesn’t let you settle in a single place for a long time.  

Moreover, if you don’t like many responsibilities, renting may be for you since you don’t have to worry about maintenance and repairs.  

On a short-term basis, renting is generally cheaper than a mortgage.  

There is not much pressure on credit requirements compared to buying a home. You will always find a landlord who will rent to you as long as your credit report does not have a history of bankruptcy and judgments. 

The catch, however, is that in renting, it may be harder for you to build equity. You also won’t be eligible for any tax credits or deductions.  

In some cases, you may be charged additional deposits other than your security deposits depending on the rental property laws of your province, your living situation, and your landlord’s interest.  

 

What’s our verdict? 

With the advantages and disadvantages of both renting and owning listed above, we conclude that both owning and renting can be the best option for you depending on which stage of your life you’re at now.  

If you are looking for stability and settling down, owning may be the one for you.  

How do you know that you’re stable?  

First, you have a stable source of income. Second, you've saved up for a down payment, closing costs, and other costs associated with owning a home.Third, your credit score is in good shape and you’ve managed your debts. 

When you think about it, owning a home might actually be cheaper than renting.  

While the upfront payment is way higher in owning than renting, you’re actually building your wealth. Your monthly mortgage can actually be a forced savings program.  

When you make your monthly mortgage payments, you're increasing the equity you can get back when you eventually sell your home — and potentially making a profit.  

Pay off your home and you'll have a dependable asset that can see you through retirement. 

On the other hand, if you are young and still want to explore more, renting may be the best option for you. 

"For young people, I would say that renting is usually a better option than buying until you know that you're going to be in a given location for five or more years and that it makes sense to invest in real estate," Murtaza Haider, a professor of real estate management and the director of the Urban Institute at Ryerson University in Toronto said.   

 

The bottomline 

Ultimately, it's up to you to decide whether you think renting or buying is the better choice for your personal situation this year. There are plenty of different factors to consider, and as with most things in life, it depends on your personal goals and preferences. 

Whatever your choice is, we’re here to help you with all your real estate needs in Central Alberta.  

Whether you need professional advice from a real estate agent, contractor referrals, home valuations, updates on the housing market, and mortgage information, contact our real estate agents so we can help you.