When Do You Know That It's Time To Buy a Home and Stop Renting?
When Do You Know That It's Time To Buy a Home and Stop Renting?
Evaluate your current situation.
Before you make a major decision like a home purchase, there's a lot of thinking that needs to be done. First, you need to look at your own current situation.
How much are you paying monthly for rent?
Your current monthly costs can actually be a lot lower than that of someone that has a home. Renting in a decent part of town can be significantly cheaper and make more sense than buying a house when you take into account all the costs.
On the other hand, if you know your monthly rent is not a good deal and that your monthly housing costs would be lower when dealing with a mortgage payment then it's almost certain that it's time to start house hunting.
Are you living where you want to live?
Think of where you are currently living. Rent payments may not make sense based on your apartment but the neighbourhood could be worth staying in. If Keep in mind that moving costs are coming out of your own pocket and that the mental toll of committing will affect you the most.
If your area is nice and close to the things that you love, will moving to a different area based on the home you want to purchase be worth it in the end? Housing costs vary vastly from place to place.
At what point in your career are you?
If you're in college and unsure of what your future career will be, renting a place can make more sense. It's better to get started making money and enjoying life before the responsibility of homeownership sets in. When you get settled into a career that sticks then it may be time for you to take the next step into the grown-up territory.
Conversely, if you're already established in a career and have been for a while then you may be ready to commit to a housing situation. The idea of homeownership is something that can be very appealing to young professionals but if you foresee a career shift coming or a big shakeup in your industry, then it may be better to wait and see once you find yourself on more stable ground.
Buying a home is a long-term investment and doing it from a position of stability is the best course of action for your financial health.
Consider your long-term goals.
When thinking of a home, buying is not only a matter of overall cost but it's also a matter of goals. To have your own home is to have the staging ground for the rest of your life. If that sounds daunting and scarier than any renting pros you've thought up, then it's time to do some more thinking.
Are you going to get married or have children?
The housing market is not exclusive to couples or families with children but first-time buyers tend to be newlywed couples or those building their own families. If you are waiting on either one of these events, then it can be a good idea to buy a house to get a headstart.
However, many people do not opt to have children or get married for a myriad of reasons. Like we mentioned earlier: for a home, ownership means responsibility. Some of the other costs involved for prospective buyers are not simply material, they can be emotional too.
Though it can make financial sense, you need to know if homeownership is right for you in an emotional sense as well.
Do you want to get on the property ladder?
If you're not too bothered about the emotional investment and you are looking at home prices and mortgage rates purely as parts of a series of financial decisions, then your worries about timing are quite different.
If you're on the hunt for a primary residence for now that you can sell to turn a profit later, then what you need to consider is the state of the economy and that of interest rates. Before you start to crunch numbers, which we'll get to soon, you need to be sure that you don't lose money by being too eager.
If you are going to be paying mortgage payments you have to remember that this is an investment you need to live in. You can start building equity early by taking a risk but rash financial decisions can do very much the opposite of saving money. Another thing you may think about in the 'rent or buy' equation is what you can use the property for.
If you're ready to take on the challenge, you can rent out the home you bought for a specific rental period while you keep living in your apartment. The additional work could be significant but if you can afford it then the home would be a good investment to build wealth until you decide to sell the home.
Crunch the numbers to see if buying a home is financially feasible
Mortgage costs
Unless you bring about a cash offer to the homeowner, then you will have to deal with a mortgage to afford a house.
A mortgage is a type of loan that a borrower takes out to purchase real estate. The lender basically agrees to pay for 80% of the house while the buyer, you, pays a downpayment of 20% of the house's price. Depending on the terms of the mortgage, you will then have to make a monthly mortgage payment every month for the duration of your mortgage.
That sounds a lot like rent.
There are key differences though: rent has no end but once you finish your mortgage payments you do not have to pay the lender anymore. Rent does not have interest (though it can feel that way when the landlord decides on rent increases), but mortgage interest is part of your monthly payments.
Depending on the mortgage you secured, your monthly payment is affected greatly by the interest rate at the time you secured your mortgage.
Going from monthly rent to monthly payments to keep your house doesn't feel like much has changed in the beginning but the difference is that you own the property. As you pay back your mortgage, you build equity in the home. This is the market value of your home after deducting the remaining mortgage balance. You can borrow against this equity or use it in other ways to attain your financial goals.
Before you get there though, you need to prove to the lender that you can be relied on for your monthly payment and come up with the down payment for the home.
This gruelling process looks at your credit history, your debt-to-income ratio, and more to determine if you will be approved.
Before making the decision to stop renting and looking for a house, the first thing you need to check is whether or not it will possible for you to get a good mortgage. The same home purchased with two different kinds of mortgages can mean vastly different sums of money.
The key factors in determining a mortgage are also the key factors that can determine what side of the rent or buy line you currently stand on.
Addtional costs
Let's say your finances and personal circumstances allow you to secure a mortgage according to an online calculator, you need to think of how your disposable income will be affected by the monthly costs associated with owning a home.
At first, you need to think of moving costs, legal fees, and all associated real estate fees. Renter's insurance and regular bills would become a distant memory as you need to take care of maintenance costs, property taxes, and other bills. If you buy a home that makes you part of a homeowners' association then that may also mean dues.
The more your home was appraised for, the more property taxes you will have to pay as well. If you join a cohort of prospective buyers, let this be one of the key takeaways: buying a home is not always cheaper than renting. Each situation is different.
Time-sensitive opportunities.
The housing market is one that fluctuates a lot. It may be tempting to build equity as soon as possible but mortgage interest and maintenance costs could be prohibitive - but what if you come to a point where the stars align and rent is no longer your only option?
The first thing you should do, always but especially if you feel like jumping a trend, is to talk to a real estate agent. No matter the way trends are looking, buying a home is a large purchase and not something you will forget about in a few years.
Try and find out if there are tax deductions that could make your purchase easier on your bank account or allow you to shoulder the costs of home maintenance. Don't just jump in because of low interest rates. It's very tempting to get out of paying rent quickly when you can afford a down payment but if your goal is to save money in the long term then patience is the key.
View All Homes For Sale in Greater Vancouver >>>
About Search Home Listings
SearchHomeListings.ca has simplified the home buying and selling process by giving you superior tools with up-to-the-minute information including active homes for sale, sold homes, market reports, and a home valuation tool! We have a team of success managers on standby to support you with setting up your saved home search and agents ready to take you out on a tour. Tap into our industry experts from inspectors, to contractors to interior designers to provide you with the best prices and service possible. Everyone attached to our website has been rigorously vetted and is made up of caring, knowledgeable professionals that work tirelessly to help you to make your home buying experience as stress-free as possible. Contact us today to see how we can help!
Sites We Follow
Categories
Recent Posts
};