If you want the luxury of living in a high-end home without the long term commitment, you may be surprised to hear that leasing is often better than buying. For example, you may be moving from another city and not sure what features you’re looking for in your house. Or you may have the travel bug and want to forgo the commitment homeownership requires. It is often more advantageous to lease than buy when it comes to high-end homes.
As a luxury buyer, you have particular features in mind, which can be challenging to obtain in a market with very few listings available in the first place.
What can you do if you want to enjoy living in your dream home without the hassle or commitment of buying? Let’s take a detailed look at the advantages and disadvantages of leasing a home.
Leasing vs Buying
Leasing can be the perfect solution. It allows you to live in a beautiful home without being locked into a financial commitment you’d rather avoid.
Simply put, a lease in Ontario is a legal document that outlines the terms, such as how long you will stay, the rental amount, what utilities are covered, and what maintenance you’re responsible for.
Unlike month-to-month rental agreements, signing a lease means your term is locked in for a pre-determined amount of time, usually 12 months. When the lease expires, you can either renew it, continue on a monthly basis, or decide to move out.
If you’ve ever rented before, you’ve likely heard of the downfalls:
- You won’t build equity as the home increases in value.
- Your monthly rent payments can be expensive, especially when housing values rise. However, this is less likely to be the case with luxury listings since they appreciate more slowly.
- You will need your landlord’s consent to remodel the home to your specifications. And even if you did, you won’t reap the financial benefit of the upgrades.
In spite of all of this, leasing a home can come with many surprising advantages, especially in the luxury market.
Less Cash Needed Upfront
For any home over $1 million in Canada, you need at least a 20% down payment before you can get a mortgage. On a $5 million property, this amounts to $1 million upfront and doesn’t even include your closing costs or land transfer taxes. On top of that, your monthly payment would be over $25,000 assuming a 25-year amortization period.
Then you will also have to set aside a significant budget to cover regular repairs, maintenance, and property taxes.
To rent a luxury property, you need only the monthly payment and a deposit for your last month’s rent. It’s a fraction of what you would need to purchase.
Are you looking for other creative options for finding your perfect dream home in Toronto? Here is some food for thought:
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More Freedom, Financially and Personally
For some people, renting is the more financially sound option, even without the equity growth. It frees up your cash flow for potentially more profitable ventures, like growing your business or other investments.
The personal freedom that comes with leasing can be even more appealing. Homeowners must commit to owning a property for several years before seeing a return on investment. They may have to cut their losses when selling if their life changes due to marriage, divorce, or career opportunities.
Leasing instead of buying means you are free of any major commitments. Once your term expires, you have the option of staying or packing up and moving anywhere you want to go.
No Maintenance to Worry About
A worry-free lifestyle is perhaps the most significant advantage of leasing over buying. All repairs and maintenance tasks are the landlord’s responsibility unless otherwise stated in your lease agreement.
If the furnace stops working or the hot water tank breaks, you only need to make one phone call, and the problem will be taken care of with little to no effort on your part.
Do you want to be the landlord instead of the tenant? It can be the perfect opportunity for the right person to generate passive income and build equity:
Stability Without Commitment
While leasing comes with a great deal of freedom, it also offers you stability. There is an off chance that the homeowner will decide that they want to move into the house. And, of course, they may ask you to leave if you damage the property, cause a disruption, or fail to pay your rent. However, most landlords are investors who want to keep the property for the long term.
Once they find a good tenant, they will do everything they can to make you happy so that you will stay as long as possible.
Leasing allows you to live in the home you love for many years with the freedom to move on whenever you choose.
A Chance to Know What You Want
You may decide to buy a home eventually. In this case, leasing is the perfect opportunity to test the waters if you’re on the fence about what you’re looking for. You can take your time to decide if you love the neighbourhood, the city, and the features of the house before making a significant investment.
If you decide that the house is perfect, a local real estate agent can help you find a similar home–perhaps in the same neighbourhood that you love!
Want to know what beautiful homes are available for lease in Toronto right now? Check out our featured listings right here.