With skyrocketing prices in many major cities, owning a home has become more of an option than a given. For some, homeownership is the best investment they’ll ever make, while it’s not the way to go for others. Here are some questions to ask yourself before taking the plunge.
Do you really want to own? It sounds great, but are you sure you want to be a homeowner? It’s not only a huge expense, it’s a lifetime of maintenance, renovations, paperwork, and dealing with neighbours. Remember that ownership isn’t the only way to build equity. Regular retirement contributions can also serve you well down the road without the headaches that come with that white picket fence.
Can you service the debt? The hardest part of affording a home isn’t saving for the down payment — though that’s not exactly a cinch. It’s affording the over 25 years of mortgage payments, property taxes, utilities, and home repairs that’ll really test your finances. Meanwhile, owning a home doesn’t mean you can ignore life’s other costs like retirement, an emergency fund, travel, education, daycare, vehicles, food, and more. So take a good hard look at your income, deduct regular expenses and contributions, and ask yourself if you can make the monthly payments.
Are you prepared for the unexpected? Just because interest rates are low now doesn’t mean they’ll stay that way forever. If you buy, make sure you’re in a position to afford higher interest rates down the road. And speaking of unexpected costs, don’t forget to factor in the hidden closing costs including legal fees, the land transfer tax, and Canadian Mortgage and Housing Corporation (CMHC) insurance.
Are you where you want to stay? Although playing the buy-and-flip game can be tempting, it’s a very risky move. There are no guarantees in real estate. Sage advice says that if you’re in a position to afford, buy in an area where you’re planning to stay. Hopefully you won’t have to take a loss if you ever do need to sell, but buying with the intention of staying tends to be the safer bet.