Should I Rent or Buy?
Deciding whether to buy or rent a home is a major decision and the right answer can vary from person-to-person. Home ownership is often associated with the great Canadian dream, but does it make the most sense for your personal situation and lifestyle? There are many factors to take into consideration when deciding, and we’ve compiled a list to help you start thinking about the pros and cons of each option.
Here are four great questions that you should ask yourself when considering whether to rent or buy a home:
1. What does your 5-year plan look like?
What do you see your life looking like in the next 5 years? Do you have a steady job now and plan to keep it, or do you think that you’ll switch jobs or careers? Are you planning on living in the same city, or do you think you might want to move for family, school, or career purposes? Or perhaps do you see yourself becoming a world traveler and jet-setting off to some new destination for a period of time? If you are planning on buying a condo, how soon do you think you may need more space?
If you think that any or all of these variables might happen, then you should consider renting over purchasing. However, if you plan on staying where you are for the foreseeable future then buying might be a good option for you.
2. How much do you have saved for a down payment?
Do you have enough saved for a good sized down payment for the property? In Canada, you must have a minimum of 5% for a home under $500,000 and 10% for a home over $500,000. However, a good rule of thumb is to save at least 15-20% of the down payment instead of just the minimum.
3. Are you aware of ‘hidden costs’ that can come with a home?
After the purchasing of the property, a lot of other costs can come up unexpectedly with being a homeowner. If something breaks, there is no landlord to call to fix it anymore; it is now up to you to get it repaired. Condo fees can also be a cause of extra costs and can go up without much notice.
Another factor to consider is whether you want to spend time on upkeep or not. Do you want to spend your Saturday afternoons mowing the lawn? Time is an important piece to consider in the ‘hidden costs’ or homeownership.
4. Do you have enough money saved for closing costs?
You also need to make sure that you have enough money saved for the closing costs that are associated with the purchase. You aren’t just buying the house; you also need to consider transfer land taxes, lawyer fees, realtor fees, appraisals, and home inspections. These can all add up pretty quickly, but when purchasing a home that is hundreds of thousands of dollars a couple hundred dollar home inspection is definitely worth the money.
These questions can be pretty difficult to answer, but if you think you are ready for home ownership you also need to make sure your bank account is too! There is a helpful Rent or Buy Calculator from Global News that may help in the decision process.
With each situation varying so greatly, it’s always a good idea to ask for a professional opinion. If you like to speak with one of our many qualified financial advisors we are always here to help and get you a financial plan that works best for your life.