Home ownership is a goal that many Canadians desire achieving at some point in their lives. There are many benefits associated with home ownership, including building equity with regular monthly payments, being able to eventually own your home outright and settling down in a community with your family.
While the desire to own a home is a common one, you may be wondering if now is the ideal time to buy a home or if you should continue to rent. By reviewing a few key points, you can make the right decision for you.
The Cost of Buying Real Estate
One important factor to consider is whether you can afford to buy a home. There are numerous costs associated with buying real estate, and these include the down payment and the closing costs associated with the purchase. You can estimate approximately three to five percent of the sales price for closing costs and approximately five to 20 percent of the sales price as a down payment. Then, use a mortgage payment calculator online to determine if your monthly budget can support a mortgage payment.
In addition to making these estimates, also consider that there are additional expenses associated with home ownership such as regular home maintenance, expenses related to replacing major components on the home such as the HVAC system, appliances and more. Therefore, you should have a cash reserve available for these expenses after paying for the down payment and closing costs.
Your Long Term Goals
After determining if buying a home is affordable for you, consider what your long term goals are. Currently, mortgage rates in Canada are near historic lows, and you may want to act quickly on your plans to purchase a home before the mortgage rate increases. However, a home may be a long-term commitment, and you want to ensure that this purchase coincides with your plans for the future.
A mortgage, for example, may take you several decades to pay off, and this will affect your budget for years to come. Furthermore, consider that if you need to relocate in the future, you will need to sell or lease your home. If you have plans to move in the next year or two, this may be more hassle than you want to contend with, and there are costs associated with both selling and leasing your home.
For some, buying a home right now makes sense because mortgage rates are very low, they are financially able to purchase a home and they have plans to settle down in the local area for several years. For others, it may be better to rent a home until they have increased personal savings account balances, firmed up their plans for the future and more.