Should You BUY or RENT in Toronto?

Are you torn between the question of whether to rent in Toronto or buy in Toronto?

You're not alone!

The question of whether to buy or rent in Toronto is one a lot of people have when looking for a new home. It involves thinking about your long-term plans, your lifestyle, and your finances. When you think about finances, investment is of course a consideration but, even more importantly, you need to know what you can afford without getting in over your head.

5 Questions to ask before deciding whether to buy or rent:

How long do I plan on living here?

Since buying a home is a huge financial and personal decision, you want to know that if you do buy, you’ll get the most out of your investment. If you’re unsure about how long you’ll be staying in one place, consider this:

Short Term: Renting is probably the better idea. You won’t see as strong a return on your investment if you sell shortly after buying. Also, if there is a down time in the market when similar homes are selling for less than you paid, you don’t want to be pressured to sell because you need to move soon. Then, you risk losing money.

Long Term: Buying a home is a good plan if you known you’re going to stay at least 2-3 years or more. That way you are more likely to see your property gain value over time. Also, it means you can settle in and enjoy your house or condo without uncertainty about where you’ll be in a year and whether you’ll have to sell.

Do I have enough for a down payment?

Other than long term plans, the biggest deciding factor between buying and renting in Toronto is whether or not you can afford to buy. It seems obvious, but many people find themselves struggling to pay a mortgage they thought they could afford. The initial down payment is a large amount of money that some people aren’t able to save. Or, they might only have enough to put a down payment on a property they don’t really want.

If you do: If you have enough to buy a home you want and will enjoy living in, then buying could be the best move. Just make sure you are comfortable with the costs of the mortgage. Talk to your Realtor about it, so you really know what you’re getting into. 

If you don’t: Rent. Or, if you still want to buy in the future, consider staying with your family for a year or two. That way you can save much faster (Thanks parents!) and still own your own place one day (Bye-bye basement futon!) without settling for financial struggle or a home you aren’t happy with.

If you have a small down payment: Are you willing to buy a house in a more affordable area, or buy one that is “a project?” If so, you could still consider buying with a smaller down payment. Or, consider a condo. They are still (often) more affordable than buying a house. Just make sure you can also afford the ongoing payments.

How much control do I want over my property?

If you are excited about the idea of transforming a home to suit your style, you can really do that anywhere. However, if you want to be able to knock out walls or renovate the basement, you won’t be able to do that with a rental.

If you want total control: Buying in Toronto is best for anyone who wants to make bigger changes. If you’re buying a house, you can renovate it to your exact tastes (and help increase its value). Tear down that wall- you own it! Many just hate the idea of paying someone else’s mortgage while knowing they’ll never profit from it, which brings us to...

If you mainly want financial control: If renovating and repairs aren't ideal to you, but investing in your own home is, consider a condo. If you’re buying a condominium you can’t make large scale changes, but you can still update your unit and have control over your financial future.

If you’re fine with less control: Renting is ideal for people who want a turn-key lifestyle and actually like giving up control (a.k.a responsibility). While you can’t make major changes, you can still paint and decorate without having to deal with repairs and other hassles of maintaining a property. So, even though you give up more control, you also give up more worry. Ask yourself: Is a low maintenance lifestyle appealing to you?

Can I afford to pay for unexpected issues that arise with a home?

If you’re considering buying a house in Toronto, you need to consider whether your income can allow you to pay for unforeseen costs of home ownership (eg. $8,000 for a new roof). Owning a home means ongoing costs, some of which you can plan for, but others that will arise without notice. If you think you’ll be ready for these costs (at least as ready as you can be!) then buying would still be a good option for you.

If “No”: Renting might be the right choice. If you are just able to afford the bills on a home, without factoring in surprise expenses, you could be taking a risk at going into debt if larger issues pop up.

If “Maybe”: If you can afford smaller unexpected costs, or simply feel more comfortable having potential issues not fall solely on your shoulders, consider a condo instead.

Can you afford a home WHERE you want to live?

Chances are if you don’t like an area, others don’t like it as much either (that’s why it’s affordable). Will you be able to take your kids to the park, walk to stores and restaurants, or commute to work easily? If not, consider if the lifestyle you’ll have in a neighbourhood will be worth the initial savings.

If “Yes”: Great! Buying is a great idea if you have the financial ability to buy a home in a good area (Assuming your answers to some of the previous questions still lead you toward buying). Your investment is most likely to pay off there, even if the home is smaller or needs some work.

If “Not Yet”: Renting or, again, living with family while saving is a smart move. If you only have enough for a home in a neighbourhood you don’t like, wait. You don’t want to spend your hard earned money on a home in a location you won’t be happy living in! Condos are another way to live in Toronto’s more vibrant areas for less than a house would cost. Click here if you are looking to rent a home in Toronto.

If you decide to buy, read more in House vs. Condo: What Should You Buy?

Still unsure whether buying or renting is the right move for you? It’s a very personal decision, so don’t hesitate to contact us to talk about your individual goals.