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To Buy or not to Buy: 10 Things to Consider

With all the housing bonanza going on it’s hard to make sense if purchasing a home is a good decision or not. If you read a newspaper you have economists predicting crashes and regulatory bodies issuing warnings about the imminent housing crisis. On the other hand -realtors report record smashing sales and urging people to get into the market before it’s too late. Damand is very high especially in Vancouver and Toronto where houses go for $500,000 above the asking price.

There are a few things to go through to help you make an informed decision:


Top 3 Reasons to Buy:

1. When you buy a home- you are forced to save a large portion of your income- so much so it makes home equity the largest asset for many if not most Canadians. While it might not be the best tool for retirement savings- it will help many families over the years if the market stays healthy.

2. If you can’t afford a house- why not look at a condo market? Condo’s and townhouses are a great choice if you want to stay close to work and amenities and don’t really need a large space. There’s usually more choice to go with it so you can give it a try.

3. Mortgage rates are at all time lows- and there is no indication there is going to be a raise. So what it means for you is that you can afford more and spend less on interest payment to your bank.

Top 3 Reasons to Rent:

1. You can actually save money by renting despite smug homeowners who tell you that renting is just throwing your money away. There is some truth to that since you don’t earn any equity but your costs are also low- no maintenance costs for example. In cities like Toronto renting might be getting more attractive and less stressful than owning.

2. You will save money faster – if you want to save more till you are on a more healthy financial footing, renting will give you more time to save for a down payment. You probably can wait out a correction in Toronto and Vancouver’s housing markets.

3. You don’t need to worry about maintenance, insurance, neighbors and so on. This means if your washer suddenly breaks, you won’t have to pay for it. No renovations either- and if your job takes you somewhere else – you can just pack up your bags and leave.

What 4 Things to Consider?

1. Start with a budget- figure out how much you are making vs the expenditures for a home. Banks have affordability calculators that can help you. If it’s a house don’t forget maintenance costs and closing costs.

2. The younger you are the better it is to take a plunge into the real estate market- you will have more time to build equity in your house and develop healthy savings habits. It’s generally not the best idea to take on a large mortgage as you get older so that you don’t have to pay mortgage into your 80’s. If you still have a mortgage in an advanced age- consider downsizing to slash your expenses significantly.

3. Consider your timeline- it’s usually not a great idea to buy if you don’t plan on living in your home for at least 5 year. If you flip too often- the only people benefiting from it would be your real estate agents.

4. Think about what you value most. Do you have to work a lot more just to afford mortgage payments? If you really need a large space owning a home is a wise investment. If you are at work all the time and only come home to sleep do you really need this hardwood stainless goodness? Renting might be a good idea for you.

And as always- make sure owning a home fits into your overall budget and financial plan.

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