Is it cheaper to rent or buy?

So many pessimistic reporters here have been telling Canadians it’s better to rent than own. Well, those people have been really quiet over the past few years given that rents have really taken off and housing prices have skyrocketed, leaving those that had purchased in a great equity position.Those that listened to the media “experts” have nothing to show except for record high rents and landlords that want to evict them because market rents have gone up by about 30% over the past 5 yrs.  

Should I rent or buy?

We are lucky to have rent control laws here in Canada, however, aggressive landlords are renovating and “renovicting” tenants so that they can profit from the higher rents. You can read more about renovictions here. This is all the more reason to buy now and lock in a variable rate.

Since the Bank of Canada has declared that the Bank of Canada rate will not be going up for at least a few years, those who are currently renting should take advantage of this and look at mortgaging a new home. The record low interest rates are all the more reason to become a homeowner now. 

Rental arrears rose throughout 2020

In 2020 alone, rental arrears went up as well. Landlords trying to make more profit have raised rents, causing many Canadians to struggle to pay. According to a market rental report, apartment structures with rents in arrears reported a 58.3% higher arrears rate compared to 2019. Only 9.2% of those apartment structures said that arrears were lower in 2020 compared to the previous year. 

Why should I look at buying rather than renting now?

As a homeowner, you don’t have to worry about your rent rising. As I have discussed before choosing a variable rate can help you take advantage of the record low interest rates. Even with fixed rates starting to rise, there is no reason for homeowners or potential homeowners to start worrying. Those who are unhappy in a fixed-rate mortgage can always refinance to a variable rate and benefit from the Bank of Canada’s low interest rate that doesn’t appear to be going anywhere anytime soon. 

The website Rentals.ca offers some great insight on just how out of control rental prices are becoming. You can use the site to search rents by area throughout Canada. Take a look for yourself and see why renting will almost certainly cost you more in the long run. 

My bottom line

The fact is, it rarely pays to rent. If you can afford to buy, if you can plan to hold for seven years (that’s how long it takes to survive any up and down economic cycle, and amortize acquisition and disposal costs), then buy, don’t rent. It is important to understand that real estate goes up and down, but over the long term it has always gone up. Now is the time to become a homeowner. 

Talking to a mortgage broker can help you make sense of the financials involved in buying. A mortgage broker can help you get the needed documents organized so that you can successfully apply for a mortgage. A mortgage broker can also familiarize you with different mortgage products, helping you to make the most of your money. 

Your best interest is my only interest. I reply to all questions and I welcome your comments. Like this article? Share with a friend.

Steve Garganis: 416-224-0114; steve@canadamortgagenews.ca