Semi Detached Home

Let’s ask the age old questions for a second: Should I rent or buy? This is never an easy question to answer, even at the best of times. With today’s housing and condo markets being what they are, it can be a downright frustrating question to ask.

There are countless articles out there on the financial risk vs. reward of home ownership as opposed to renting when you consider alternatively putting your money in the stock market or other investment vehicles. But one way or another, beyond the cold, calculated investment consideration of home ownership there is the emotional, practical, and personal preference that must also be considered that oftentimes is overlooked.

 

Whether you are a young professional, starting or raising a family, or retiring, we have an innate pull towards owning a piece of property. There is a pride of ownership, as well as sense of belonging to the community, that is not impossible, but is hard to recreate through renting.

 

From an investment standpoint as well, there are a number of factors to consider before making the choice between renting or buying. I have a good friend who, beyond diversifying his investments in other ways, rents and flips houses. He is very careful about the properties he chooses, since (and this is especially true in the city centres) the rental income versus cost of ownership can certainly be a fine line if you aren’t careful. He does particularly well though, and seems to get a ton of satisfaction from it too.

 

So whether you are looking at home ownership versus renting from an investment standpoint or otherwise, there are a number of questions to ask yourself before you do make the transition from renting to buying.

 

1.
Do you have enough money for a downpayment. You would need at least 5%, but 20% or more to avoid CMHC Insurance charges (legally required on downpayments less than 20% – find out more here).
2.
Beyond your downpayment, do you also have enough money for your closing fees. This includes costs such as lawyer fees, appraisal costs, a home inspection, realtor fees and so on. Typically you should budget 1.5% – 5% of the purchase price to ensure you have these costs covered.
3.
Does your Total Debt Ratio match up with your property of choice. Using PITH (Principal, Investment, Taxes, and Heating) – also called your Gross Debt Service (find out more here) – your ratio should be no more than 32% of your total monthly income. Any more and you might risk missing a mortgage payment or defaulting.

 

Also something to consider is your cost of maintaining the house. This is a cost that many new home owners don’t consider since they are used to how things are typically set up when they are renting.

 

While this list can seem daunting at first, there are many people out there, us included, who can point you in the right direction and help ensure you are ready financially for home ownership.

The big thing to ask yourself before you pick out the home of your dreams is whether or not you have a stable job, your downpayment covered, your debt ratios are in line, and you can cover the fees of closing and ownership. While rates are at an all-time low, you also must plan your finances in case rates do end up going up, however slightly.

 

We can help you with much of this – and anything that we aren’t able to cover, we can point you to an effective and reliable realtor who can! Let us know if you have any questions.