Is owning a home right for you?

March 1, 2017

Ask yourself these questions:

  • Do you enjoy moving often?
  • Do you prefer using your savings for such things as vacations, retirement or starting your own
    business?
  • Do you enjoy not having to worry about regular maintenance and repairs?

If you answered yes to any of these questions, you might not be ready to own a home yet. While you probably have a lot of good reasons for wanting to buy a home, you also have to consider your reasons for not wanting to.

Remember that buying a home is one of the biggest emotional and financial decisions you’ll ever make, so prepare yourself to make a knowledgeable decision.

Although buying a home almost always seems like a super idea, it is important to understand what homeownership involves. Of course, being a homeowner is something to be proud of, but it also means having to invest money, time and energy and take on added responsibilities. So, before you decide to buy a home, make sure you’re ready.

A recent survey by HSBC indicates the need for millennials to carefully plan their home purchase.

“Nearly three-quarters, or 73 percent, of millennials who planned to buy soon said they had not yet started saving for a down payment. As well, more than a quarter of those in the 18-35 group said they had not yet made any sort of budget yet.”1

When most of us consider becoming homeowners, we immediately think of how wonderful it will be. It is true that there are a lot of good reasons for wanting to buy a home. It is important to understand that owning a home necessitates a change in lifestyle and adaptation to incorporating financial planning into your paradigm.

“Even many of those who’ve managed to buy had bungled their planning, as 42 per cent of Canadian millennial homeowners said they spent more than they anticipated. That’s less than the average across the nine countries, where 56 percent of millennial owners said they had spent more than they planned to on their first home.” 2

Some advantages of owning a home:

  • Financial Security. If housing prices rise, your home can provide you with some financial security due to capital appreciation.
  • Flexibility. You can decorate or renovate your home to meet your own family’s personal tastes and needs.
  • Stability. Having a place of your own can offer security to those that can carry the expense.
  • Memories. Home is where family memories begin. Traditions within a home that you own may add value during seasonal holidays when family and friends visit.

Although it is nice to think about the positive aspects of owning a home, it is important to consider the downsides as well. Here are some of the main disadvantages of owning a home:

  • Financial Stress. Coming up with the down payment, meeting regular mortgage payments and other ongoing costs will tie up a lot of your cash, and can put considerable stress on your
    finances.
  • Maintenance. Keeping your home in good shape requires time and money.
  • Potential higher costs. You may pay more each month for housing than you did as a renter. There are also
    the extra expenses for maintenance and property taxes.
  • More responsibility. You alone are responsible for payments, repairs and maintenance. It is reported that 37% of millennials hit up their parents  – the bank of “mom and dad” – to help them pay their housing costs. 3
  • Qualifying for a mortgage The CMHC notes that there are two affordability rules you must apply to determine how much you can spend on housing without risking your financial situation as a new homeowner. 4
    • your monthly housing costs should be at or under 32% of your gross monthly income
    • your monthly debt load (including your mortgage) should be at or under 40% of your gross monthly income

Please talk to us, as we can design a plan to fit your budget. You may also want to look at the CMHC Homebuyer’s Guide.

Source: This article is provided by a mortgage brokerage firm for its representative brokers. Statistics have been garnered by AdviceonMedia, cited below. Inquiries: editor@adviceon.com

1 CBC News

2 Ibid

3 Ibid

4 CMHC

 

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