Have you noticed how topical my posts are? Somehow, something in the news ends up as the topic of one of my posts. What a shocker. What is also a shocker, besides the "two in the pink and one in the stink", is that I haven't has a post in a month. So much for my stated goal of 4 a month. I would suspect that I'll have a few more in December, probably something about secular and religious holidays, appropriateness of giving cash and gift cards, and I don't quite no what else. If I really pushed it, I could get 2 a week, but they would have to be really short.
But enough inconsequential preamble. Instead, I'll start the preamble to my actual post.
With all the action in the markets lately, and one of the underlying causes being crash of the US housing market and to a lesser extent the decline in the Canadian housing market, this seems to be a good time to examine the benefits and costs of owning your own home as compared to renting.
Renting is way better: Renting a place to live has many advantages over owning. While many homeowners will try to tell you otherwise, renting is considerably cheaper than owner. When cash flow is a concern, there is nothing better than renting - you know exactly what your primary costs are going to be. There may be some fluctuation in some of the utility costs, such as power or water and heating if you pay for them, but your rent is your rent. For the term of your lease, you know how much you are going to pay. And if you don't pay for your utilities, then you are really set - no worries about raises in those rates. Your month to month costs will be considerably lower than a comparable homeowner. When you own, you pay for: mortgage, taxes, all utilities, all repairs, maintenance, insurance - and all of those can increase. When you rent, you pay rent. And you get notice if that goes up.
Money isn't the only thing. When you rent, you don't have to worry about the place. You don't have to worry if the fridge breaks down - you just call the landlord and they replace it. You don't have to wait for the repairman either, because it is the landlord's responsibility. You just give them permission to let the repair person in. And maintenance? None. Front walk is snow covered? Not your problem. Electrical needs to be updated? Not your problem. Furnace needs cleaning? Not your problem.
The last benefit of renting I will mention is somewhat less tangible. Suppose you decide to move. If you rent, you put in your notice and leave, sometimes waiting for the end of the lease. If you own, you have to sell - maybe it will sell when you want, maybe not. If it doesn't, then you pay for two places while waiting for the first one to be taken of your hands. When you rent - you just leave. Your time is your time.
Owning is the only way to go: Owning is the best way for anybody to build up net worth. If you are going to be paying all that money every month for rent, you should get a mortgage because then at least you are building up your equity in your home. Maybe it takes 25 years to pay off a house, but when it's paid off, you live for free. If you rent for 25 years, you have nothing to show for it. And when you own your own home, it improves your credit with lenders - you can get cheaper credit than
those who don't.
The most important thing about owning your own home is that you don't live by anyone else's rules. If you want to out nails in the walls, put nails in the walls. If you want to tear down a wall to make a room bigger, do it. It you want to jump up and down in your living room, there are no downstairs neighbours to complain. And there is nobody telling you you can't have pets - go get that iguana! When you own your own home, you really are in control of your life.
A less tangible benefit of owning a house is that it is a way of showing to the world that you are a responsible adult. Home ownership is making a point to the world that you are a contributing member of society; however shallow that may be, it is also the truth. People who rent are not afforded the same level of respect as people who own are.
What I think: I think that there is a happy compromise in all this. From a financial point of view, renting and owning both have benefits: renting is cheaper, but a mortgage essentially forces you to save. If you can use the cash you save by renting to actually save and not spend, in the 25 years it would take to pay off a mortgage, you would have easily saved enough to purchase two homes. Renters get a bad rap, I think - sometime deserved, but renting can really help you financially. But the flip side to that is that there is no feeling like that of actually owning your own property - having a backyard that you can do whatever the hell you want to do can be a great feeling. I think that in the first few years, the property owns the owner; and it takes about 5 -10 years for that to change.
How I relate: I have been both a property owner and a renter; currently I rent. Ownership can be such a chore, and if you own a condo, as I did for a while, it really isn't any different from renting - you are still stuck with the condo corp's rules. And even when you have paid off your property, you still never really own it - you are always paying taxes and utilities. So while I am happy renting now, I do want to own in the future; but I want as little a mortgage as possible. Whether owning or renting, the individual has to decide what value they place on ownership; for some, ownership has immeasurable benefits while for others the time and money they
give up to own is not worth the benefits.
