Is It Better To Buy Or Rent Your Primary Residence ?
Today, your hosts Daniel Foch and Nick Hill answers an age old question - Is it better to buy or rent your primary residence? We answer one of the most highly debated questions we get such as overcoming the social stigma of renting, Mortgage payment % premium over rent, USA VS Canada - rent vs buy, how TMI affects buying, the real numbers behind renting & buying
Key Takeaways:
National Bank Economics shows that mortgage payments are significantly higher than rent in many Canadian cities, with Vancouver having a 66.3% premium on mortgage payments over rent.
According to a bank rate survey, owning a home is more expensive than renting in all 50 US states, with mortgage payments often being at least 50% higher than rent.
There are often-overlooked costs of homeownership beyond mortgage payments, including property taxes, maintenance, and insurance, which renters do not pay.
The net growth on a home can yield approximately a 5% annual return on a $200,000 down payment, resulting in about $60,000 profit after five years. However, this must be weighed against costs such as commissions for selling the house.
Investing the same amount in an S&P 500 index ETF could potentially yield a 43% return before tax over five years, slightly outperforming homeownership. High-performing individual stocks like Apple, Nvidia, or Bitcoin could offer significantly higher returns (e.g., 267.98% for Apple, 2300% for Nvidia, and 435% for Bitcoin), though these come with higher risks and tax implications.
A cash-flowing investment property could yield an 186% return over five years with an 8% cap rate, or 175% with a 6% cap rate, considering principal payments and appreciation. These returns can potentially exceed those of primary homeownership and even some stock investments.
Homeownership offers personal value such as customization, stability, and potential savings discipline, as mortgage payments act as a form of forced savings.
Renting provides mobility and financial flexibility. Renters might save and invest the difference between rent and potential mortgage payments into other assets or personal ventures, potentially leading to greater overall financial growth.
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