Purchasing a home is a big deal! After all, it’s probably one of the most expensive, but rewarding, purchases that you will make. Which is why it’s important to ensure that this decision is the right one for you.
Now for so long, people have been operating under the “it’s better to own than rent” mentality. While owning a home has a mutitude of benefits, sometimes it may not be the right fit at the time. To help you gain some clarity as to which option may be the best choice (for you in this moment), we’ve decided to break it down into digestible information that can guide you. So, here’s how to tell if you should rent, or if you should buy!
When You’re Ready to Buy…
Like we said before, purchasing a home is a big decision, but it is also incredibly rewarding if it is the right fit for you. We understand that the thought of a mortgage and a down payment can be overwhelming, however if the following applies to you, then you’re probably to make the purchase.
- You can afford a mortgage: The first step that anyone should take if they are considering purchasing a home is to meet with a mortgage broker. During this process, your broker will help outline what you (and your significant other if applicable) can afford and what the mortgage payments will potentially look like. This will help you get a sense of the monthly costs, which you can compare to your budget to see if it is manageable.
- You have a down payment saved: The next big step that goes towards the financial aspect of owning a home is the down payment. During a meeting with your realtor, you can gather a sense as to how much money you’ll need to make a downpayment on a home that’s within your budget. Again, once you have an idea of the cost, you’ll be able to determine whether you have or will have enough money saved, or if more time and saving is required.
- You’re ready to set down some roots: Purchasing a home requires you to stay put in one spot for at least 5 years or more. So, it’s important to ensure that you are ready to set down some roots and settle down in one particular neighbourhood for some time.
- You’re ready to take on the responsibilities of being a home owner: Besides the mortgage and monthly payments, there’s a lot more to being a homeowner. Unlike when you rent, if things go wrong or need to be replaced, it’s up to you to assume the cost and call the expert, rather than reaching out to your landlord. While this is not a major task, it is one that should be considered when deciding whether you’re ready to own or not.
- You’re ready to make some sacrifices: When saving for or settling into your new home, you make have to make some lifestyle sacrifices. Morning Starbucks runs or yearly trips may have to take a backseat for awhile, while you get used to owning and paying for your home. If this is a non-negotiable for you, you may be better off renting for the time being.
When you’re ready to rent…
While owning a home is extremely beneficial, we understand that for some people it may not be the right fit, or the right timing to make this purchase. You may be in a better position to rent, if the following applies to you:
- The cost of home ownership is too high: Owning a home is more than just the mortgage payment. There’s also the potential condo fees (for condos, apartments, and townhomes), insurance, property taxes, hydro, etc. It can be costly. This is why we encourage everyone to do their research and get a good understanding of what they can afford and what their monthly payments (everything included) will look like. If the total cost is out of your budget, then it’s best to rent rather than buy.
- You’re able to rent and save money at the same time: The cost of renting can get pretty pricey, however, if you’re able to find a place that you can easily afford and allows you to save money for a down payment or your future home at the same time, then it may be worth opting into, until you feel ready to make a purchase.
- You’re not sure where you want to live yet: The best thing about renting is that it allows you the freedom to move around and try out new neighbourhoods without having to settle down for 5 plus years. If you’re still trying to figure out your 5 year plan or determine the perfect neighbourhood for your lifestyle, renting may be a good fit.
- You aren’t ready to sacrifice traveling or other lifestyle expenses: If you aren’t ready to say good bye to your yearly vacations or cut down costs in other areas of your life, it may be worth renting for a little while longer. Homeownership doesn’t mean you’ll have to cut everything out for good, but it does take some time for new homeowners to adjust to the elevated costs in their life, causing them to forgo certain luxury expenses.
- You have a high-debt ratio: To determine what you can qualify for a mortgage, a broker will have to evaluate your debt ratio to your earnings. If you currently have a high debt ratio, it’s probably not beneficial for you to try looking for a home. Instead, the better option would be to rent and work on paying down your debt, so you can qualify for a better mortgage later on.
From finances to life-planning to your lifestyle, there are many reasons that dictate whether someone should buy or rent a home for the time being. These questions and considerations are great guiding points that will help you determine which path is the right option for you. However, until you meet with a mortgage broker and your realtor team and start looking at the hard, concrete numbers, you won’t be able to make a educated decision, so we recommend starting there first, to see all options, before deciding to either rent or buy.
If you’re interested in learning more, we’re here to help! Feel free to contact to us today for a consultation so we can help you determine the right path for you.