To buy or not to buy… that is the question.
It’s the biggest purchase most of us will ever make, and it can be a satisfying step towards putting down roots in a community you love. But buying a home also means taking on a mountain-load of debt with a good helping of risk. And if you happen to be buying a home solo, pulling the trigger can be an even more terrifying proposition. (Check out ace real estate maven Sandra Rinomato as she helps women go it alone on Slice’s hit show, Buy Herself.)
Before you start checking out those open houses and planning your first housewarming barbecue, you need to decide whether you’re even in the market for a house. Here are five things to consider before taking on a mortgage of you own:
Take an honest look at your finances
It sounds like a simple task, but many people find it tough to give themselves a true financial assessment. Don’t overestimate your income and don’t minimize debt (eg. “Student loans don’t count,” or “I’ll have that credit card balance paid off in two months, no problem”). Get the spreadsheets out and record everything that’s coming in and everything that needs to be paid off. Also, remember that you’re going to need at least five per cent in the bank for a down payment, and you should probably put down more so you won’t be making payments well into your golden years.
Consider your future plans
Take a look at where you are in your life. How stable is your job? Are you planning any other big expenditures in the near future (a wedding, a baby)? Any desire to move to another city? If you’re considering a major career change or are concerned your current position might be in jeopardy, now is probably not the best time to be taking on massive home debt. You might be better off saving funds while renting until things settle down.
See what’s out there
Get to know MLS, before you hit the open house circuit. Spend a lot of time checking out neighbourhoods, discovering where it is you’d like to end up and figuring out what the going rate is in the areas you prefer. Read up on real estate in your city – whether it’s the local newspaper or your favourite city website, arm yourself with knowledge to ensure you end up in an area you’ll want to stay in and that you don’t pay way too much for your home.
Determine what you can afford
The Canadian Mortgage and Housing Corporation offers a handy-dandy Mortgage Affordability Calculator, which will help you determine how pricey a house you can handle. As well, they have a Mortgage Payment Calculator, which will help you figure out how much you’ll be paying monthly for that dream home. And don’t forget, it’s not just the mortgage you need to worry about. Condo fees (if applicable), house insurance, property tax, heating, electricity, maintenance and repairs will also take a bite out of your paycheque once you’re a homeowner. Assume you will be spending a good 40 per cent more, on top of your mortgage payments. A trusted financial advisor can be a great resource in your decision-making process, though be wary of banks eager to lend you money. Just because they’ll give you the money doesn’t mean that you should take it.
Take the plunge… or don’t
After all this searching, you will have your answer. Just listen to your gut — not your mom, your best friend or that gorgeous Victorian semi that’s been calling your name.
Shelley White is a Canadian freelance writer, editor and TV producer who contributes regularly to The Globe and Mail, The Huffington Post, The Grid and Spinner.com. Shelley is also a mother of two who aspires to never again carry a credit card balance.