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This video discusses the pros and cons of buying and renting. It also discusses the 5% rule which suggests that the total unrecoverable cost of owning a home, including property taxes, maintenance, and cost of credit, should amount to around 5% of the home's total value annually. If renting a comparable home costs less than 5% of its value each year, individuals may opt to continue renting and invest the difference in tax-free savings accounts (TFSA), registered retirement savings plans (RRSP), or stocks.

I liked to share this website because it provides valuable insights into buying vs renting. Besides, understanding the “5%” rule can help you make informed decisions when deciding to rent or to buy based on your financial situation, personal status, and investment goals.

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From a young age we've been told it's better to buy than to rent. Better to build equity in a house than "pay money into nothing" as a renter. What was once a milestone in the life of the average Canadian has become a longer-term goal for some as the jaw-dropping state of Canada's real estate market takes hold. There are plenty of circumstances when renting might make more sense than buying. Below, you'll learn more about the pros and cons of each option so you can determine which is best suited to your needs.

Pros Of Renting A House

Homeownership isn't for everyone and that's OK. Some housing markets in Canada make owning a home nearly impossible where others may present unique rental options that could far outweigh the pros of buying. With the right investments and know-how, you don't need to own a home to achieve financial security.

Flexibility

If you don't like the idea of being tied down to one neighbourhood, one style of home, one city or even one country, renting may offer the most flexibility. Once your lease is over, you're free to do as you please instead of being forced to stick around for long enough to avoid penalties for breaking your mortgage. If you like to travel, have considered living abroad, or just want the freedom to move around as you please every year or so, renting may be better suited to your lifestyle than homeownership.

Maintenance

One of the perks of renting is not being on the hook for any maintenance issues or necessary repairs. The daily maintenance and regular upkeep of a home can cost a LOT of money from sourcing materials to paying for the skilled labour to get the job done properly. Renting means your landlord is responsible for any issues that may arise so you're a free phone call away from a solution to your problem, no investment of time or money necessary.

Less Expensive

Despite the way it may seem, renting is often cheaper than a mortgage in the short term. If you don't make enough money or have a high enough credit score to qualify for a mortgage, renting is typically a lot more affordable and accessible. If you're looking to invest in other things or areas of your life, renting may also free up more disposable income for you to do with as you please.

Cons Of Renting A House

If we're being honest, there are a lot of not-so-nice things you'll encounter as a renter and it's important to be aware of those things before you make any big decisions.

As you've probably heard a million times already, renting means you aren't building any equity. Sure, you're able to avoid a mortgage and taking on any serious debt as a homeowner, but at the end of the day, your hard-earned money is going toward paying off someone else's mortgage instead of your own.

Increases In Rental Prices

Rental rates can be just as high as the price of homes in today's market. Finding a place that suits your needs while also working with your budget can be difficult. You'll also have to consider that the price you're paying now will continue to increase over time and there's nothing you'll be able to do about it as your landlord can legally raise your rent by a certain percentage each year in accordance with local laws.

Less Stability Compared To Homeownership

Renting comes with the acceptance that things may be more unstable than you thought. Your rent is never a fixed cost and building ownership/management can change at any time which could trigger new policies, procedures or even costs. Generally speaking, it can be hard to feel stable while renting.

Pros Of Buying A House

There's no denying that homeownership has serious appeal, especially if you've been renting your whole life and know first-hand the cons associated with it. While the benefits will vary person to person, there are some general benefits that look impressive on any pro list across the board.

Often renting can seem like a more stable option, but it's important to remember that your landlord can hike the rent at any time. If improvements are made to units or if a year has elapsed, he/she is legally allowed to increase what you pay for no reason whatsoever. A fixed-rate mortgage is the solution with a set rate you'll pay every month that makes mortgage payments predictable and easy to work into your overall budget.

It also means if you want to paint or make the space your own, you're able to pursue whichever home improvement projects you want instead of requiring approval from a landlord or being generally restricted by rental rules/regulations.

Capital Gains

If the value of your home increases, you get to pocket the equity as the homeowner. If you choose to sell down the road, those capital gains (minus tax of course) will be yours to reap.

Building Equity In Your Home

We've all heard this from a young age: Paying into your home will help you build equity. But what does that really mean? Every time you make a mortgage payment, you're moving closer and closer to fully owning your home and as a result, having something of value you can truly call your own.

Cons Of Buying A House

When you buy a home, you're making a long-term commitment. Even if it isn't your forever home, it's going to be your home for a least a few years and as a result, there are some cons you may encounter.

Maintenance

As a renter, your landlord is responsible for any maintenance related issues that may arise in your unit. As soon as you become a homeowner, that responsibility falls solely on your lap, so you'll need to be prepared for the extra costs you'll encounter. Whether it's replacing the roof every 10 years, fixing a pipe that's leaking or keeping up with landscaping, there are plenty of hidden maintenance costs you should be prepared for once you make the decision to buy.

More Expensive

Mortgage payments are often higher than monthly rent. Plus, that's not factoring in property taxes, condo or community fees (if applicable) and all the costs you'll encounter up front when you officially buy the property like land transfer taxes, legal fees, insurance etc.

Rooted To The Same Place For A Longer Period Of Time

When you buy a home, you're making a commitment - to a specific place for a specific amount of time. Breaking your mortgage will result in stiff penalties and costs you won't want to incur unless absolutely necessary. If you have some doubts about where you see yourself in 5 years or aren't sure you want to commit to being in the same neighbourhood/city/country for an extended period of time, mortgages don't offer nearly as much flexibility as renting does.

More Responsibility With Ownership

When you make the choice to purchase something, you take on a considerable amount of responsibility and debt as a result. If you previously enjoyed the freedom of disposable income, you'll likely lose that with extra money being shifted into new areas like maintenance, taxes, legal fees etc.

Should I Rent Or Buy A House?

There is no such thing as a right or wrong answer when it comes to the age-old argument of renting versus buying. Before you do anything else, take a look at rental costs versus home costs in your neighbourhood of choice. You can look at property value reports to see what homes sold for recently in your area which will help give you a better idea of what you'd be paying for a mortgage versus monthly rent payments. Beyond anything else, your local housing market will likely play a huge part in influencing your decision to rent or buy.

You'll also want to ask yourself important questions like how stable is your employment situation? How long do you plan to stay in your current place? Are you ready and willing to commit to homeownership? Answering these questions honestly will also help guide your decision to determine if you're ready to make the leap from renting to homeownership, or if that choice even makes sense for you.

The 5% Rule For Renting

When most people talk about buying a home versus renting, they often underestimate the actual cost of owning a home. Purchasing a home isn't just paying the ticket price and walking away. The 5% rule will give you a good idea if you're finally able to afford buying a home and help you clarify the real costs related to renting and buying.

The annual unrecoverable cost of owning a home is about 5% of the property value (whether you have a mortgage or not). If your rent is lower than that for a comparable home, you should keep renting. If your rent is higher than that, you're probably better off buying a comparable home.

When you're renting, the total unrecoverable cost is the amount you pay in rent every month. When you own a home, the total unrecoverable cost is a bit more complicated and includes property taxes, maintenance of your home and the cost of credit (aka the interest you're paying on your mortgage).

Property taxes are around 1% of your home's value each year, maintenance costs are also around 1% and the cost of credit generally comes up to 3%. That means that the total unrecoverable cost from a home you own should be around 5% of the total value each year, which is where the 5% rule originates. If you can rent for less than 5% of the value of a comparable home (calculated annually), you may decide to keep renting and choose to invest the difference into a TFSA, RRSP or stocks.

There is no perfect housing option, just the perfect option for each of us as individuals. While both renting and buying have their cons, they also have their pros. Lean into the process of understanding the difference as it relates to cost savings and be sure your decision is being based on data and your personal finances, and not just on what your relatives told you is best.

If you're looking for some insight into the home buying process and are curious about next steps or planning for your future, our team can help!

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Renting Vs. Buying A House: Which Option Makes The Most Sense In Canada?

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Wondering what the best option is between renting vs. buying a house in Canada? Read our article to learn about which one suits your needs.

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This website serves as a comprehensive resource hub for consumers interested in various aspects of housing in Canada. It lets you explore home-buying calculators, buying and renting guides, mortgage and maintenance tips, FAQs and more.

I find it useful and a great source of education and assistance for housing literacy. It also serves as a guide for determining whether to buy or rent.

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Helping you determine what's right for you - tools and guides that can help you decide. Explore mortgage calculators, renovation and maintenance tips.

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Bank of Canada holds policy rate at 5% in first decision of 2024

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On January 24, 2024, the Bank of Canada made the decision to stick with its 5% target rate for overnight lending. It had increased interest rates twice in the previous summer, so this was its fourth consecutive hold.

https://creastats.crea.ca/board/orea-interest-rate-changes

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This website explains the types of mortgages in Canada which are open, closed, convertible, hybrid, and reverse mortgages. These types vary in flexibility, interest rates and terms in addition to other differences.

I shared this website because it provides valuable information about different types of mortgages which helps you understand your options when considering buying a house. It helps you make informed decisions and save money by choosing the right mortgage type that matches your needs.

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If you want to make large payments on your mortgage or pay off the entire mortgage without penalty, then an open mortgage is for you. An open mortgage offers maximum flexibility. These homeowners are willing to accept some fluctuation in the interest rate for the flexibility of paying off part or the entire mortgage before the term is complete.

A closed mortgage is a commitment with a pre-determined interest rate, over a pre-determined period of time. A buyer who uses a closed mortgage will likely have to pay the lender a penalty if the loan is fully paid before the end of the closed term.

With a closed mortgage, the borrower may select a fixed rate or variable/adjustable rate depending upon their needs or preference. See "Rates" for more information on the types of rates.

Closed mortgages generally have lower interest rates than open mortgages. Most lenders will allow borrowers with closed mortgages to make a lump sum payment of up to 10, 15 or 20% of the original mortgage amount once a year without penalty. This payment goes directly toward paying down the principal of the amount owing. Many lenders will also allow a borrower to increase the mortgage payment by up to 10, 15 or 20% as well as allowing the lump sum payment.

A convertible mortgage is an agreement made at the beginning of a term that allows homeowners to change the type of mortgage they hold during its term. If a homeowner wants to start with an open mortgage and then lock into a closed mortgage, a convertible mortgage is the right choice. It offers lower rates than an open mortgage and has the option of switching to a closed term. A conversion to a fixed rate mortgage can also be done by most lenders when the borrower has originally selected a variable rate mortgage and now wishes to move to a fixed rate before the end of the term.

A hybrid mortgage is a term used when there is more than one type of mortgage contained in a single mortgage registration. The registration could include a fixed rate portion, a variable rate portion, a line of credit portion, or any combination of these. Each lender will have their own unique name for this type of mortgage allowing anywhere from 2 to 100 different products contained in the registration of the mortgage. This product is often suggested for the savvy borrower who will use this as part of their overall financial plan.

This type of mortgage allows homeowners 55 years and older to convert their home equity into either a lump sum payment or monthly cash payment(s), generally for living expenses. A homeowner's equity is drawn down by the lender to the homeowner - the borrower. When the homeowner no longer wishes to occupy the property as their principal residence, or upon the death of the borrower, the loan balance is due. The balance of the loan is settled from the proceeds of the sale of the property either by the owner themselves or their heirs.

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Detailed look at the five types of mortgages available to Canadian homebuyers, including open, closed, convertible, hybrid and reverse mortgages.

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This video is about Real Estate Market predictions for 2024. It discusses the interest rates, new home constructions, and new rental constructions. The government's target is to build more homes by 2030 as an attempt to stabilize home prices and overcome the problem of demand higher than supply. So, more homes need to be built, and the builders need to be motivated by finding competitive interest rates.

I chose this video because it discusses things to consider if you are looking to buy, sell, or rent this year. In general, it gives you a clearer picture of how things will look like in the near future.

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What are some housing market predictions for 2024 and if you are looking to buy, sell, or rent this year what are the things to consider? Real estate broker Nick Markou joins Global News Morning's host Laura Casella with a discussion on interest rates, new builds, rental properties, and more.

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Real estate market predictions for 2024 | Watch News Videos Online

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Watch Real estate market predictions for 2024 Video Online, on GlobalNews.ca

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This video explains the criteria set by Canadian mortgage institutions and offers advice on how to increase your qualification potential. It also discusses the Gross Debt Service Ratio and the Total Debt Service Ratio which define what you qualify for. Moreover, there are Important tips on how to tweak your financial standing to qualify for more.

I find this video very informative and useful because it provides the knowledge needed to confidently navigate Canada’s mortgage landscape by knowing all what you need to know about the mortgage qualification process.

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Below is my reflection on this interesting topic, Housing Market, through this great assignment:

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In this video, there is a prediction of a mild recession in the Canadian economy from 5% to 3.5% by the end of 2024. The interest rate will decrease in the second half of 2024 to increase affordability. Consequently, this will have a positive effect on affordability due to lower mortgage debt servicing costs. Renewing mortgages in 2025 or 2026 will be significantly higher compared to renewing in 2024. It also discusses the challenges Canada's Housing Market is facing and when is a good time to buy.

I find this video useful because it spotlighted the potential economic changes in Canada in 2024. The mention of increased affordability due to lower mortgage debt servicing costs provides valuable information for those considering buying or renewing homes.

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Is 2024 a good time to buy a home in Canada?

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In this video MRB Partners' Phillip Colmar discusses the current state of the Canadian housing market, highlighting excessive house prices relative to income and the risk of a housing bubble. The bursting of the bubble is considered inevitable due to the extensive nature of the bubble and the potential for rising mortgage rates and unemployment. Although the exact timing of this event is unknown, if bond yields keep rising, it might happen soon. The video also discusses the potential for a future recession, which might have a greater effect on the housing market and cause Canada's economy to contract sharply.

I find this video useful because it offers important considerations for those interested in real estate, economics, or financial planning. Understanding these dynamics helps you make informed decisions regarding investments, housing purchases, and overall financial strategies in the Canadian market.

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Biggest housing bubble of all time? | Analyst on risks in Canada's real estate market

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RBC Economics predicts home sales are expected to slump in the first six months but grow in the second half of the year. The Bank of Canada is expected to reduce its interest rate, easing price pressures. Canadian resales could grow by 9% in 2024, with sales more significantly in Alberta than in British Columbia and Ontario.

I find this website useful because it informs readers about expected fluctuations in home sales and interest rates, allowing them to anticipate potential opportunities or challenges in the real estate market.

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Predicted rate cuts could boost real estate market, says RBC Economics.

Reviews and recommendations are unbiased and products are independently selected. Postmedia may earn an affiliate commission from purchases made through links on this page.

Canada's housing market will be "a tale of two halves" in 2024, a new report from RBC Economics has forecast. It predicted in a recent report that interest rates will remain elevated for the first few months, potentially the entire first half of 2024. Afterward, it noted that the Bank of Canada is likely to begin reducing its overnight interest rate from the current level of five per cent, leading to lower borrowing costs for mortgages.

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In turn, home sales should continue to slump in the first six months, and then show growth in the second half of the year.

While the rate cuts could come sooner if inflation falls closer to two per cent, RBC Economics predicted current rates may result in more homeowners experiencing renewal shock, leading to more properties going up for sale than expected.

That could boost supply slightly right before interest rates fall, easing price pressures as pent-up buyer demand spills onto the resale market.

Due to the expected tailwinds coming from easing interest rates, the report predicted that Canadian resales could grow nine per cent in 2024, reversing the trend of shrinking demand in 2022 and 2023, down about 25 and 11 per cent respectively.

Resales are expected to rise more substantially in Alberta than in British Columbia and Ontario where "crushing home ownership costs" continue to depress resales. Alberta is forecast to see sales grow nearly 14 per cent this year versus 2023, the report predicted.

Despite the expected rise in sales, the average price of a home in Canada is forecast to fall one per cent, versus a 2.6 per cent drop in 2023.

Should conditions continue to improve throughout the year, 2025 should see more demand with prices forecast to rise about three per cent, RBC Economics added.

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Canada's housing market expected to pick up steam

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Predicted rate cuts could boost real estate market, says RBC Economics.

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The MLS Home Price Benchmark Index for single-family houses rose 1.1% in February from January to $1,302,000 seasonally adjusted. The index is slightly above its September 2021 initial value, having dropped by 16.4%, or $255,000, from its peak in February 2022. In February 2023, the index is 2.1% higher than it was.

https://wolfstreet.com/2024/03/18/the-most-splendid-housing-bubbles-in-canada-national-house-prices-flat-in-feb-16-from-peak-condos-drop-further-on-bank-of-canadas-5-massive-qt/

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What did you learn about your topic that surprised you the most?

Learning about the Housing Market in Canada, I was surprised the most by how quickly home prices can rise or fall due to factors such as changes in local economic conditions and shifts in the supply and demand dynamics.

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Provide a real-life example of how this topic is relevant or interesting for you.

The Housing Market topic is very relevant and interesting for me as it gave me valuable insight into the things to consider when deciding to buy a home. The information I learned greatly educated me about the situation of the market, the prediction of the future, the types of mortgages available, and even how to increase my qualifications for buying a home. In light of this information and knowledge, I am planning to continue renting until I graduate, find a job, and settle down financially so that I have a stable income. I also learned that home prices vary depending on many factors one of which is the location; so I planned to find a job in or near the city I chose for buying a home.

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If you could pass on your knowledge to a family member or friend, what do you think is the most important thing to pass on?

Since all the people I know are aware of the Housing Market situation and the current Canadian economy, I would pass to a family member or friend what could benefit them practically. For instance, I would share with them the tweaks they could make to improve their qualifications, the types of mortgages and how to choose the right option that matches their needs, and the predictions of fluctuations in home sales and interest rates. I believe this information can help them make strategic decisions to buy a home and to plan for their financial future.

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In this wall, you will learn about Canada's Housing Market. First, you will learn about the current state of the Canadian Housing Market and the predictions of the Real Estate Market for 2024. In addition, you will explore the criteria set by Canadian mortgage institutions and learn how to increase your qualification potential. Besides, you will learn about the Canada Mortgage and Housing Corporation (CMHC) website which serves as a comprehensive resource hub for those interested in housing in Canada. Moreover, you will learn how to decide whether to buy or rent. Lastly, you will learn the types of mortgages in Canada and how to choose the right option. Overall, after gaining all the knowledge posted on this wall, you will be able to make strategic decisions about your living situation, planned goals and financial future.