To help with your decision, your lending specialist will ask you about your long-term plans. Do you plan to live here at least three, and preferably five, years? If not, you won’t recoup upfront costs of buying such as closing costs. How large is your down payment? Low interest rates and 5 per cent down may look attractive, but it may not be a bargain in the long run.In weighing the cost of renting against owning, buyers need to consider hidden costs of ownership – everything from lawyers’ fees, to property taxes, to maintenance costs. Then there are costs that are hard to assign a dollar value, such as the amount of sweat equity that goes into home ownership. Renters enjoy the convenience of someone else taking care of burst pipes during that cold snap.When it comes to crunching the numbers, researchers looking at Canada’s complicated real estate market say there are many variables and that buyers need to look at their own cities in detail to determine when to take the plunge.
In early 2007, the University of British Columbia’s Sauder School of Business, came to the conclusion that, on average, home buyers are better off financially than renters – except when they’re not. Professor Tsur Somerville, the lead author on the study, told The Globe and Mail that for renters to keep up with buyers financially, a few market forces have to be in place.
“For renters to accumulate the same amount of wealth as owners, they must be extremely diligent savers, invest in a high-yield instrument, do so with minimal fees and have the good fortune to live in one of the cities where the right combination of low rents and/or low house price growth allows them to invest more in a relatively higher return asset,” Somerville said.
In some markets, it may make sense to postpone buying – but keep saving – until there’s a shift in the housing market.
Once all the lifestyle questions have been answered, the question of whether to buy is also a question about how you choose to save. For many, their mortgage serves as a forced savings plan. Lifelong renters who choose convenience over ownership have to recognize that they need to make extra effort to save and invest wisely.
Make an appointment with your Libro Coach today to determine if you should continue renting and saving, or make the plunge and buy your first home.