What are the advantages of buying a house vs renting? (with a calculator to use)

What are the advantages of buying a house vs renting? (with a calculator to use)


Are you renting and not sure if it’s the
right time to buy a house? What are the costs? In this video we look at the
advantages of buying a house versus renting, that’s coming right up. Welcome to Homebuyer’s School brought to you by Brookfield Residential. Hi there, I’m Karl Yeh, and welcome to
another Homebuyer’s School video a channel where you
get the latest strategy tactics and tips from home buying experts and remember
if this is your first time on this channel and you want to get the latest
strategies from the experts, make sure to hit a subscription button below, hit the
little notification bell so you don’t miss anything. So today I’m joined by
Cory McDonald community manager with Brookfield Residential and the question
we’re gonna answer, actually the topic we’re gonna answer today is, what are the
advantages of buying home vs. renting? Now I know this is a question that I’m
sure you always get. Always get, especially because people that are
moving either out of their parents basement or brand new to the city they
want to have a look at the the different costs associated with each. Being very
biased myself I do have a little bit of a say that I think buying brand new
makes a lot more sense than renting but different situations would say that
renting makes more sense to the individual. I’ll start with renting,
depending on if you might not necessarily have approval or
you’re trying to rebuild your credit score, sometimes renting is a great way
to get into a new place, build some independence and try and rebuild a
little bit of that credit to eventually get you into a brand new home
as well. Sometimes when you’re first starting on
a brand new home and you don’t necessarily have all of your furniture, a
lot of these rental places will come fully furnished so you don’t have to
spend an arm and a leg buying your bedroom set, buying your TV, buying all of
your furniture, so that’s a cost that’s associated in the rental fees as well so
there are some benefits in that sense I would say that I think from a financial
standpoint there’s a lot more benefits to buying brand new even in a flat
market you’re still building equity versus spending money and paying
somebody else’s mortgage instead of getting that equity back in yourself. A
very basic example is if your rent on let’s say $1,500 a month, that’s
$18,000 a year over five years that’s close to $90,000 that you’re spending on
living so even if there’s no increase in the value of your home over a five-year
period you’re still getting X amount of dollars back in the sale of your home so
you’ll eventually get that money back versus renting where once you’ve kind of
paid it on rent it’s gone, you’re not really seeing the other– So you –yeah,
that’s five years, you have $90,000 that you paid somebody else right whether
it’s in an apartment or whether it’s in a basement or wherever, you’re still
renting, you’re paying somebody else versus let’s say you buy a house for
$100,000 even if there’s no increase right, so the market has stayed
completely flat for five years which is kind of unheard of especially it’s
like places like Vancouver, Toronto where it’s a little crazy and in the
market you’re still building equity in your house for those five years right,
so if you think about it then that ninety thousand you paid plus the
equity that you could have made, that’s a huge difference. It’s not just losing ninety thousand dollars over that five year period, it’s
the loss of equity that you could be putting into your home so it could be
closer to $180,000 swing in the difference in costs. Depending on
how the market has risen from your– Which nobody can predict so I’m not
comfortable saying that each markets gonna go up to one to nine percent
because no one can 100% predict the resale market but generally you’re right,
a lot of the major Canadian cities are seeing a lot of growth so it is a great
investment to buy now and then have that appreciate over the next couple of years. What about the argument about–okay so yes, let’s say I do want to purchase but
I don’t have the money to pay the down payment and so my thinking would be
okay, let’s save up right, for the down– A lot of brand-new home buyers are
maybe a little bit intimidated because new homes do require a down payment
and if you’re just getting out in the market you might not have
five to 20% required to make that purchase. There are a lot of tools I will
say that either the the builder themselves or even a lot of financial
institutions will provide those builders to help get them into a home sooner
rather than –again that –the costs of waiting so a lot of builders will have a
graduated payment plan so even if you don’t have say as an example, of basic 5%
down payment– Well let’s take the $400,000 all right, and so what is
that, 5% down? 5% down on most new builds, with a mortgage would be $20,000
at the 5% down payment. Which you understand is a lot of money for a
brand new homebuyer that’s not –I don’t have that in my back pocket right now,
don’t have that my couch cushions but there are resources out there to help
you out so if a new builder, if you have five to ten thousand dollars or even
if you’re able to find a loan from a family member to get that amount then
over the construction process over the building time to complete your home you
can save up and pay off the remaining ten thousand over that time frame and a
lot of these builders will do –it’s an interest-free so you’re not paying
additional costs on top of that so it’s a great way for you to get in now
instead of having to rent or to wait to get into the home that you love and you
want to get into. So let’s reiterate that. So let’s say obviously the construction of
your home, of a new home takes eight months right but you only
have five thousand or maybe even two thousand as a down payment, so between
the time it takes you to put that two thousand to the time it –eight months
later to actually your homes completed, you’re saying in between that time
there’s a lot of builder programs that it can actually allow you to continue
paying that down payment until your house is complete. Correct yeah, as a
builder we like it because we’re moving products, we’re moving our inventory and
selling our homes as a buyer, it’s allowing you to not have to access a
bank for a loan and pay interest or to have to wait and lose money. Even like
I said, if you’re able to borrow from family or friends to do that we already
discussed the numbers as far as the loss in renting versus being able to own
so in five years is when you turn around and sell that
home, that’s easily when you could turn around it and give back to that family
or friend member once we made that equity in it. So it’s actually the same
as what we talked about renting right so fifteen hundred over five years each
month we’re talking back to $90,000 so let’s say okay, I wanted to
save money to meet that $20,000 down payment for that say $400,000
house but if you really think about it too, you’re actually losing the same amount of
money because you’re still paying rent and while you’re saving up you could still
be making the equity. Correct, you’re probably even
losing more than that $20,000 because not only you’re throwing money towards
somebody else’s mortgage towards rent but then you might be compromising
your lifestyle to try and save up that money on top of your rent as well. Awesome. Is there anything else you want to add
in terms of the advantages of buying versus renting? Most of the markets right now are
accommodating towards growth and return on your investment so it’s a
great way to kind of put your foot in the door by even starting out small and
then two to three years down the road you can always upgrade based on what
your financial realities are at that time. Perfect. So just to let you know we
also have a rent vs. own calculator that you can take a look at, it’s in the
description below. Thank you very much Cory. The question I
have for you is what are your thoughts on renting versus buying? What are your
thoughts on the advantages and disadvantages of each? Let us know in
the comments section below. Thank you very much for joining us and
we’ll catch you next time. That’s another edition of Homebuyer’s School. Tune in next time for more expert tips and tricks and visit homebuyersschool.ca to bring you one step closer to finding your dream home. As with everything, it would be great if you like and share our videos, also please let us know if you have any home buying questions you want us to answer.

2 thoughts on “What are the advantages of buying a house vs renting? (with a calculator to use)

  1. What are your thoughts on renting versus buying? What are your thoughts on the advantages and disadvantages of each? Also remember to watch our other videos with tips and advice for first time home buyers: https://www.youtube.com/playlist?list=PLTRYbItmaqW93h3CigBfSidCDiNjw0ElR

  2. Thank you !

Leave a Reply

Your email address will not be published. Required fields are marked *