Are you ready to buy a home?
Mortgage rates have never been lower, and some markets have never been hotter. Canada’s headline-dominating housing market has many wondering if they’re ready for homeownership.
How do you know if you’re ready to buy a home? Everyone’s situation is unique and not even the best mortgage affordability calculator on the planet can answer the question like only you can.
Ask yourself the following questions to determine if you’re ready to buy a home. If you’re not truly ready, that’s okay. At least you now have an idea of what you need to do in order to get ready to buy a home.
Can I afford a home?
This is pretty much the main thing on people’s minds when asking themselves if they’re ready for a home. Homes aren’t cheap after all. The average house in Canada costs over half a million dollars and that number skyrockets in major cities like Toronto and Vancouver. When it comes to owning a home, there are more costs than just the purchase price. That means you need to consider the following to see if you’re ready to afford a home:
- Down payment. Down payments are a portion of a home’s total purchase price paid upfront by you, the buyer. The rest of the purchase price is covered by a mortgage. If you want to qualify for a good mortgage, you need to have good credit.If you want to save money over the long run, make sure you have a large down payment. Ideally, your down payment should amount to at least 20% of the purchase price or higher to avoid paying CMHC insurance fees.
- Monthly mortgage payment. You need a solid, steady income to avoid the stress of scrambling to make your payments or the pain of losing your home because you defaulted on your loan. Fortunately, lenders aren’t going to jump straight to foreclosure if you’re having trouble with your payments, but it’s still not a good position to be in.
Why do I want to own a home?
Houses are pretty much only for one thing: living inside. Homeowners have a choice about whether they want to be the ones living in the home. If you buy a home with the intention of using it as a rental or investment property, chances are you’ve already owned a home before, but in case you haven’t, it’s important to note that being a landlord can be a huge headache and can sometimes result in even more work than simply living in a house yourself.
Investing in a rental property will give you a monthly income that can perhaps offset most of the home’s carrying costs – while also giving you a valuable asset that can really pay for itself over time. You can also use a strategy of house flipping, which eliminates the headache of being a landlord, but replaces it with the challenge of finding cheap fixer-uppers, executing cost efficient renovations, and selling for profit. It depends on market conditions as well as your own personality to know which investment strategy is best.
What if you just want a home because you want to live in one? You may like being the one with the final say on what you do with your property. Or you may like the idea of building equity. There really aren’t any invalid reasons to want to own a home, but it’s good to ask yourself this because a lot of the time owning a home isn’t going to make your life that much better. Sometimes it can even be better financially to rent. You might as well have a good reason for wanting one if you’re going to go to the trouble of owning.
How long do I plan on keeping this home?
Homes are typically long-term purchases, but they don’t have to be. If you flip houses, you won’t plan on owning the home very long, and that’s fine. Some people buy smaller, cheaper starter properties and only hold onto them for a few years before moving to a bigger place to suit their changing lifestyle. When people start families, they often try to put down roots in a larger home and hold onto it for decades. Taking your lifestyle into consideration could help you decide whether or not you want to buy a home now, wait until you get married, or wait until you have kids.
Keep in mind how neighbourhoods and home prices change over time. The longer you stay with a property the more things are likely to change around it. If you plan on keeping the home long term, try to be confident that the area has good growth potential.
Am I ready for the responsibility of owning property?
Home ownership is not easy. You will have to take on the responsibility of maintenance and upkeep of the property in order to properly enjoy it. That means prehaping up for a whole host of less-than-pleasant tasks like mowing lawns, shovelling, and all sorts of unexpected issues like broken heating or air conditioning and faulty plumbing. Either you need to pay people to maintain your house or you’ll have to do as much of it as you can.
There’s a lot to consider when buying a home. Answering these questions honestly can help you decide if really are ready to buy a home.