Are you better off renting or buying? Even though a lot of people have concerns about down payments and closing costs, these costs are an investment into your future where you're likely to see a return. That being said, there are several considerations you'll want to keep in mind when making this decision.
Why Renting or Buying is Such an Important Question to Answer
There has been a lot of talk in the media about young people opting to rent their first home, instead of buying. Even though buying offers a lot of advantages, these younger people have found possible advantages to renting. Their thoughts about renting vs. buying help shape a lot of the discussion about which is better throughout Canada.
Each family has different goals and needs. These needs will help shape a lot of the decision-making process, no matter which option you choose. Taking the time to think your decision through beforehand will make this whole process a lot easier.
Why So Many Rent
It's easy to think of renters as mostly being in less favourable financial circumstances or not wanting to take the responsibility that is required to own a home. However, many young working professionals are renters. Some of the things that lead them to make this choice include not wanting all the commitment that comes with owning property or they simply don't have a down payment ready yet.
Additionally, professionals may choose to rent if they're likely to relocate or be moved around a lot for their work. For many people, it's easier to end a rental agreement in case of an unexpected move than it is to sell a home.
Motivations for Buyers
For many prospective buyers, the market is more about an opportunity to take advantage of a buyer's market than a challenge. People who look at this situation as an opportunity are aware of the fact that such opportunities don't come along all the time. With Calgary growing at such a rapid rate, you can feel confident about your choice being beneficial in the long run.
Another reason that many buyers want to avoid delaying a home purchase is that so many of Calgary's neighbourhoods are in such high demand. With easy commuting times to downtown and access to great amenities, it's easy to see why so many live in these newer outlying communities. Once you've purchased a home, you can be sure of having access to the same perks that many already enjoy.
How Much Do You Have in Savings?
A 16 percent down payment is around the average for most new Canadian home buyers. However, if you want to avoid mortgage loan insurance costs, you'll need to put 20 percent down. The more you have to put down initially, the more you'll save in the long run.
Another consideration if you're a first-time buyer is whether you can allocate an additional 1.5-5 percent for closing costs. You'll be able to avoid realtor fees as a first-time buyer, but closing costs are not optional. When you consider the importance of buying a new home, these costs are a relatively small sacrifice to make.
How Much of Your Income is Available for Expenses?
Your debt service ratio is an integral part of the equation taken into consideration when you take out a mortgage. Ideally, the debts you incur on a monthly basis shouldn't account for more than 35 to 40 percent of your annual income. Some of the obligations taken into consideration include credit cards, personal loans, and car loans.
Fixed costs that include groceries, housing, and transportation, shouldn't account for more than 50 to 60 percent of your after-tax income. The more you keep your expenses under control, the better your chances of affording your dream home. Don't be afraid to splurge from time to time, but keep it reasonably under control.
Enjoying the Long-Term Benefits
One of the benefits people look forward to the most with buying a home is eventually becoming mortgage-free. The equity in your home can also be your ticket to borrowing to be able to afford other big purchases. You'll enjoy a better life as a homeowner, in any case.
When you're ready to take the plunge into homeownership, NuVista Homes offers options that are perfect for your lifestyle. You'll be able to enjoy a home that has all the features you want in no time.