Renting vs home ownership

To rent or to own? This is one of the most important financial decisions a Canadian will make in their lifetime. Both have pros and cons, and with the average home sale price in the Greater Toronto Area now exceeding more than half a million dollars—the Toronto Real Estate Board just released the average sale price as $501,614 in March, up 10% from last year—this decision is becoming increasingly pressing.

Of course, one of the best reasons to buy is the fact that you can reasonably expect your home equity to increase over time, as your mortgage is paid down. Furthermore, regular property appreciation means your net worth easily accumulates. Renters, on the other hand, have no property investment and hence no wealth change from owning a home. Renting, does however, usually means lower living expenses and the opportunity to put that saved money in other opportunities.

For many, the question of whether to buy or not is a question of affordability. If you are considering buying a home for the first time, you need to realistically establish your financial situation and evaluate your present household budget. From that, determine how much house you can afford and the maximum price that you should be considering. Know exactly how much you are spending each month on housing. You need to also know exactly how much debt you are carrying to figure out whether you are financially ready for homeownership. If you decide to buy a home, mortgage lenders will be asking for this information.

The Canadian Mortgage and Housing Corporation advices that your monthly housing costs shouldn’t be more than 32% of your gross monthly income. Housing costs include your monthly mortgage payments (principal and interest), property taxes and heating expenses. This is known as PITH for short — Principal, Interest, Taxes and Heating. (The CMHC has home buying tools and calculators on their website: While some lenders will let you go as high as 40% (ie 40% of your monthly household income goes toward your monthly mortgage payments, property tax payments and heating costs), you really need to be careful of over-leveraging yourself.

To be sure, there are pros and cons for both renting and buying. Everyone must make the decision that is best for them and their family. Of course, we must not underestimate the non-monetary value and enjoyment of owning a home.

In my 24 year career as a Mississauga real estate agent, I have seen very, very few people regret buying their first home. Call me at 905-502-1500 and I can discuss buying your first home with you.