Should I Rent or Buy? Five Questions to Ask Yourself
Tuesday Jul 05th, 2016Share
To rent or buy? That is a question running through many first-time buyers’ minds these days, especially as the real estate market in the Greater Toronto Area (GTA) continues to reach new levels.
Conventional wisdom says that homeownership is a better option because it is an investment into your future. With historically low interest and mortgage rates, it’s a good time to consider buying a home.
However, a decision of this magnitude comes down to personal preference and your lifestyle. Is home ownership the right choice for you right now? Or, is renting more practical and affordable?
Here are five questions to ask yourself:
1. Where do you see yourself in five years?
A lot can happen in five years! Job changes, travel opportunities, marriage, children, schooling and other life changes can have a direct impact on your home ownership experience. Before spending hundreds of thousands of dollars on a new home, consider your five-year plan to make sure that your priorities are in line.
2. Have you calculated the cost of carrying your own home versus the cost of renting?
If you are leaning more towards renting, calculate the cost of carrying your own home (your principal and interest payments, plus property taxes) and compare it to the cost of renting. You may find that the costs are similar.
3. How much have you saved for a down payment?
Effective on February 15, 2016, homebuyers are now required to put a 10% down payment on mortgages over $500,000. That’s a lot of money to have saved and it’s just the required minimum. Many mortgage experts will advise you to have a 15-20% down payment, which will provide you with a cushion should you need it down the road.
4. Do you have money saved for closing costs?
While first-time buyers don’t have to pay certain fees, there are a number of closing costs to consider. These can include mortgage loan insurance, appraisal and land survey fees, deposits, application fees, mortgage broker fees, home inspection fees, legal costs, land transfer taxes and more. You can read more about closing costs by clicking here.
5. Are you prepared to handle the additional responsibilities and costs associated with home ownership?
As a homeowner, you are on the hook for all maintenance and repairs – both physically and financially. A good rule of thumb is to estimate your maintenance costs around 3-5% of your home's value per year. If you are not handy and prefer to hire out, that percentage may need to be increased.
There are many online calculators to help you determine the costs associated with renting vs. buying. This is a great way for first-time buyers to gain a clearer financial picture of home ownership. It’s also advisable that you talk to your mortgage lender to learn how much you can afford.
Still unsure if you should rent or buy? I can help! As a real estate sales representative serving Mississauga and the GTA, I’ve had the pleasure of helping many first-time buyers call our community home.
I work with my home buyers every step of the way, from getting qualified by a financial institution, finding a new home, negotiating the best price, arranging home inspections, choosing a lawyer and re-visiting the property before closing. I help my clients navigate the GTA’s highly competitive real estate market in a stress-free, yet effective manner.
To learn more, please feel free to contact me by clicking here.