If you’re deciding whether to buy or rent a home in Toronto in 2020, then this is the article for you! We’ll compare renting vs. buying to help you understand which is ideal.
Most of the time, we are told that it’s cheaper to rent than to buy a home no matter where you may be in the world. However, there are certain factors that you need to consider. And that is just what this article aims to do for you.
It’s no secret that Toronto is among Canada’s most expensive cities. Property valuations have skyrocketed in recent years alongside rent. However, it’s possible to find a great home for reasonable money outside of the city core and in a suburb like Brampton or Kleinburg. You’ll still enjoy many of the big-city benefits but without the exorbitant prices.
We’ll get to all of that shortly, however. Without further ado, let’s have a look at both the pros and the cons in this extensive rent vs. buy in Toronto writeup.
Should You Rent or Buy in Toronto in 2020?
Pros of Renting in Toronto
Here are some benefits of renting a house or condo in Toronto.
1. Less Worrying About Maintenance
While you should, of course, always treat your residence with respect, extensive maintenance is not your responsibility as a renter. When the dishwasher needs replacing or plumbing issues arise, the property owner will typically take care of it.
2. Short-Term Commitment
Renting does not involve a long-term commitment anywhere near what you’d find when buying a home. Lease agreements are very much the norm in Toronto, with short-term and long-term options available. This may be preferable if you’re just getting settled in the city while learning more about its various suburbs for when you’re ready to buy a property.
3. Cheaper Monthly Payments
Rent on a one-bedroom apartment in Toronto comes in at an average of $2,300. While that’s a lot of money, it’s well below what you’d pay for a mortgage. Of course, the important thing to remember is that rent is money you’ll never see again whereas mortgage payments actually build equity in an asset (your house).
Still, renting can make sense if you’re strapped for cash and/or don’t earn enough for mortgage approval.
Because rental properties are only temporary, you won’t have to worry about selling if your neighborhood is too noisy, requires a long commute to work, or just isn’t close enough to some of Toronto’s hotspots. Alternatively, if you decide to switch cities altogether, you can do so on a whim provided your lease agreement is short-term enough.
Cons of Renting in Toronto
Of course, there are always two sides to every argument. Here are some of the cons you need to consider when deciding to rent vs. buy in Toronto.
1. Equity Can’t be Built
Even though renters don’t take out a mortgage or even foot the bills for maintenance, they won’t be able to build on equity either. Instead, the monthly rent payment goes to the property owner, who can use it to invest and become wealthier.
2. Rental Money Can Never be Recovered
Compared to owning a house, where part of your mortgage goes into paying off your property, rental money can never be recovered. But this isn’t to say that you are simply “throwing money away” as you are still using that money to live somewhere. You’re just not going to earn a profit on those funds as a property owner would.
3. You Can’t Alter The Property to Your Liking
Since you’re living in someone else’s property, you do not have the right to change the rental space to your liking. This means that you can’t paint the walls a different color, add fences to the yard, or even decorate the interiors like typical homeowners would.
Some property owners may not even allow you to install an air conditioner.
4. The Rent Could Increase
Another downside to renting is that the monthly rental payments can be renewed in about 6 months or a year from when you moved in. If you’re low on cash, this may mean taking on debt or giving up a property that you otherwise enjoyed.
Pros of Buying a Property in Toronto
Here’s why people generally consider buying to be the winner of the renting vs. buying in Toronto debate.
1. You Build Equity
Owning a house helps build equity, which equates to increased wealth over time. In fact, many people use their homes as a type of retirement fund; products such as home equity loans can give you access to funds as needed.
2. You Call the Shots
With a property of your own, you answer to no one when it comes to adding more furniture, changing the wall paint, installing new fixtures, or anything else that personalizes your home. It’s your domain!
3. A Great Investment in the Long Run
The Greater Toronto Area is one of North America’s hottest real estate markets. While this makes it fiercely competitive, it also means that buying a home here represents a solid investment. Many parts of the region (including the communities we build) are not as pricey yet and have tremendous potential for growth in the coming years.
If you’re buying a home in an up-and-coming place like Durham Region, you’ll find it an especially good investment as the area continues to grow.
4. Greater Predictability in Payments
Having a fixed-rate mortgage means that your monthly payments are predictable and more stable than when renting.
Cons of Owning a Property
1. Long-Term Commitment
If you’re someone who isn’t looking to stay in the same place for at least five years, buying a home is perhaps not the greatest idea.
2. Maintenance Costs
Since the property is under your name, you’ll have to foot the bills for regular house repairs and maintenance, be it fixing a leaking toilet or repairing the roof of your house every 10 years or so.
You can avoid excessive maintenance costs by choosing your home carefully. Look for a good builder (see our list of the best in Durham Region here) with a reputation for delivering long-lasting homes.
3. High Upfront Costs
The closing costs on a mortgage can range between 2 to 5% of the purchase price, including property taxes, home inspection, mortgage insurance, first-year homeowners insurance, and more.
4. ROI Can Be Slow
It will take time for your house’s value to appreciate, which is why you shouldn’t expect an immediate return on your investment.
As you can see, there are several pros and cons to consider when weighing whether to rent or buy in Toronto. Generally, you want to move in the direction of buying a home as that will help you build equity in a large asset that can serve you for decades to come. Owning a home can also be more comfortable given the freedom you have to make decisions about the property.
Still, you don’t want to buy before you’re ready. We hope this guide has been helpful in your quest to determine whether it’s the time!