Is it more advantageous to buy or rent a house?

How to determine whether it is advantageous from a budgetary perspective to rent or buy a house?

The real estate market depends primarily on geography. The more advantageous the location is according to various factors, the higher the value of the building.

“If you want to become an owner, you must first check whether you have the necessary financial capacity,” says Johanne Leblanc, budget consultant at Option Consommateurs. Have we saved the first down payment (between 5% and 20%)? Do we intend to use specific programs such as RAP or CELIAPP? Are we determined to make certain sacrifices and restrict our lifestyle?

Above all, you have to keep an overview.

This means that a future owner ensures that his budget covers all obligations associated with his property: mortgage payment, property tax, maintenance (approximately 2% of the value of the house), creation of a fund for urgent repairs and other expenses (insurance, electricity, heating, etc.).

“If you deny yourself housing and food because you buy a property, it doesn’t work,” adds Ms. Leblanc.

Do your calculations

You can use online calculators to compare renting and buying a property. I remember two:

• Financial Market Authority (AMF)

• National Bank

These tools take various factors into account:

• Type of property (house, condominium);

• maintenance costs;

• Purchase value;

• Initial investment;

• monthly rental costs (including heating, electricity, insurance);

• Annual rent increase.

Calculating the AMF includes a very insightful additional calculation: the return on your investments, minus taxes, if you save the difference between rent and mortgage.

These calculators are not infallible: everyone has their own financial reality, dreams, or personal values. But they are unbeatable when it comes to creating clarity from a budgetary perspective. Especially since in some cases the difference between the cost of a house and the rent is so small that it is an advantage to be an owner.

If the quality of life aspect plays a large role in your desire to become an owner, you should know that, according to a CMHC study, an owner in Canada must work an average of 240 hours per month to earn 30% of their gross income respect (compared to 113 hours for a tenant). Those 240 hours equate to 30 8-hour days at an average hourly wage of $23.69 for a home that costs about $300,000.

One detail: Since there are only 21 working days in a month, you either have to have a higher salary, be two, or spend well over 30% of your income on your property (which is risky).

ADVICE

• Make an appointment with an ACEF budget consultant in your region or neighborhood (consommateur.qc.ca/associ.htm). The service is free and thousands of Quebecers have been able to accurately determine their scope as a future owner.

• Use now the budgetenligne.net application, which will make your life much easier (also for Apple and Android).

• When purchasing a home, some underestimated costs typically account for between 2% and 5% of the property’s value.

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