Buying vs. renting a home, part 1

How do you know whether purchasing or renting a home is better for you? Here are some financial and non-financial factors to consider when making the decision.

Myth: “Buying a home is always a better financial decision than renting.”

You may have heard this advice before, or perhaps the old adage that “renting is throwing your money away.” In this blog post, we will look at the reasons why buying might or might not benefit you more than renting.


First, let’s look at some of the benefits of becoming a homeowner:

  • stability and peace of mind of owning your home
  • you will not have a landlord who could increase rent or decide to sell the property
  • forced savings, by virtue of the paying down mortgage principal
  • able to modify or renovate your living space
  • you own an asset that (ideally) appreciates in value over time
  • ability to access the equity in the home for other purposes
  • pet owners enjoy more flexibility


Buying a home can end up being a good financial decision, although it’s usually not nearly as lucrative as you think, once you factor in some of the following ordinary costs of home ownership:

  • buying/selling costs and real estate commissions
  • repairs and maintenance
  • mortgage interest
  • property taxes
  • utilities
  • house insurance
  • mortgage default insurance (CMHC)

In addition to the “ordinary” expenses listed above, you should also consider possible landscaping and yard care expenses, furnishing your new home, and purchasing or replacing appliances. Condo owners aren’t off the hook either, as they need to be aware of rising condo fees and possible special assessments. Another consideration is the opportunity cost of deploying your down payment towards a home rather than to investing the funds elsewhere.

Ensure you have a good idea of the total costs that come with home ownership before signing on the dotted line. 


How long do you intend to stay in the home?

It’s generally not a good idea to purchase a home if you expect to move within the next few years, due to the high costs involved with selling real estate and the frontloaded mortgage interest. Short-term real estate market volatility may work against you as well. The “5 Year Rule” is a general rule of thumb—less than 5 years, strongly consider renting.

Consider the impact of rising interest rates on your mortgage.

We’ve been in a low-interest environment for a number of years, but that may not continue to be the case in the future. The impact of rate hikes on your mortgage payments should be considered.

Location, location, location

A huge factor as to whether you’re better off buying or renting.

You may have heard the expression, “Your home is your biggest investment,” but viewing your home as an investment does not make good financial sense. Homes typically cost you more money than they make once you minus the expenses of owning the home and the costs to sell. Any gains realized on a sale are usually much less than you think, and you may end up losing money overall.

This should not discourage a potential buyer from becoming a homeowner, this information just helps you be better informed about the total costs. And, if you do decide to take out a mortgage, try to avoid falling into the trap of buying more house than you need—typically, the bigger the house, the higher the costs.


What are the most important things for you to consider when deciding to buy or rent?  Post a comment below.



The views and opinions expressed in this article are those of the author and do not necessarily reflect that of CPA Canada.

About the Author

Davin Stachoski, CPA, CA

Davin is a tax accountant and CPA Canada Financial Literacy volunteer.