With interest rates being as low as they are and have been for some while, the conversation is all about how to buy a home. Put together your down payment, get a low interest mortgage, and your off to home ownership! Easy peasy, that’s all it takes!
But is that all that it takes? What if there’s a bit more? To rent or own, that’s the question. So what’s involved?
If you decide to rent, you can sample various neighbourhoods in a city without tying up all of your finances, you can leave maintenance up to your landlord, and you can save tons of money should you choose a rent lower than your income. However, if you choose to rent you’re also looking at:
Limited Equity Gains: When you have a mortgage against a property that is increasing in value, you are gaining equity. This is great should you choose to sell because if you sell for more than you purchased for, you’ll make money. As a renter, your money is just going to pay the bills, it is not building you any equity.
Dodgy Landlords: When I rented I was lucky enough to have great landlords but I have heard horror stories. As much as landlords are interviewing you to rent the place, be sure to dig a bit into your potential landlord. Ask why the previous tenants are leaving and if possible, ask if you can speak to them.
Finding a Place: Much like home ownership, finding a place to rent can be equally as trying. There are a few sites like RentersPages.com and Kijiji.ca that help you locate a place but you still need to check it out in person and vet that landlord.
If you decide to purchase a home there are a ton of great things to look forward to. Depending on where you buy, there’s large equity gains, the feeling of putting down roots and of course, pride of ownership. On the flip side there’s also:
- Maintenance Fees: If you purchase a condo, maintenance fees can be almost half of your mortgage. Yes, you get lots of amenities like your gym, maybe a pool, perhaps a screening room but that cost can add up and if the property isn’t increasing in value as much as you’d hoped, then when you go to sell you may not have much of an investment gain.
- Property Taxes: This can be included in your mortgage, but the rule of thumb is 1% of the purchase price of your home is what your property taxes will be annually.
- Structural Upkeep: Even if you purchase a new home, there will always be things that need to be done. Repair the roof, fix the patio, replace the air conditioner. These fees don’t come monthly, instead they come with a whopping unexpected bill! To keep yourself afloat financially, you need to have a financial cushion set aside in case of emergencies.
- Continued Decor and Home Projects: With home ownership, the real trick comes from all the money you want to spend improving your surroundings. A new rug, a new paint job, renovating the bathroom, the projects on home ownership are endless!
- Finding a Place: Depending on where you live, the time, energy and money involved in finding a place can push you over the edge! Sites like realtor.ca and zoocasa.com can help you get an idea of what kind of home you want, but knowing what you want and getting it are two different things.