Home ownership is a big decision that shouldn’t be taken lightly. Before you even start looking for a new home, it’s important to consider the responsibilities involved, weigh the pros and cons of purchasing a home and ensure you’re in the right position financially.
Important questions to ask yourself.
Before we get too far down the road, let’s make sure that home ownership is the right call for you. Here are some things to ask yourself before taking the leap:
- Am I in the right financial position?
- Do I understand all the responsibilities?
- Am I planning on moving within the next five years?
- Is my income and employment stable?
- Am I ready and able to make consistent mortgage payments every month?
- Am I prepared for the extra costs involved?
- Do I have any other upcoming big-ticket expenses, like travel, post-secondary education or a wedding?
Home ownership vs renting.
There are plenty of benefits that come with home ownership, but it also takes a substantial upfront investment. Some people love owning their home because it gives them the ability to customize their castle. Others prefer the freedom and flexibility of renting. Before you decide, it’s important to look at some of the pros and cons of both:
Pros & cons of buying.
Pros: (1) As you pay off your mortgage, you are building equity in your home. (2) Your home can appreciate in value, earning you money upon resale to build your net worth. (3) Once you pay off your mortgage, you eliminate the expense of housing. (4) When you renovate your home, you get the benefits for as long as you live there, and it increases your property value. (5) Potential rental income.
Cons: (1) Substantial upfront down payment. (2) Extra costs such as home insurance and property taxes in addition to your mortgage payment. (3) Unexpected repairs. (4) Maintenance costs.
Pros & cons of renting.
Pros: (1) Less of a commitment. (2) Repairs are the landlord’s responsibility. (3) No maintenance costs.
Cons: (1) In smaller markets, the cost of renting a home is often higher than a mortgage. (2) The landlord can choose not to renew your lease annually. (3) You’re paying someone else’s mortgage and property tax.
Homebuyers’ timeline.
If you’ve made it this far and think buying a home is the right decisions for you, here are some steps you should take leading up to placing an offer.
Six months before.
Start saving for a down payment, check your credit report and handle any discrepancies.
Three months before.
Avoid taking out any new loans or making any other major changes, like switching employment.
Two months before.
Review the mortgage pre-qualification process to figure out what paperwork you might need.
Are my finances in order?
Arguably, the most important part of the home buying process is your finances. Have you started saving for the down payment? Do you have your debt under control? Have you made any large purchases like a car in the last 3-6 months? These are the types of questions you need to ask yourself before continuing the home buying process.
Ideally, leading up to purchasing your home, you should ensure that you have minimal debt, a little nest egg for a down payment, and you haven’t made any large purchases in the last 3-6 months.
If you’re experiencing any concerns about your finances, we encourage you to speak to your Northern Advisor about how to get back on track, either by visiting your local branch, booking an appointment online or by calling our True North Hub at 1-866-413-7071.
