Purchasing a house may be a thrilling experience as you imagine yourself living in a home that you truly own. However, you must be financially and emotionally prepared to Buy a home or participate in this process since it does come with its own stressors.
When you purchase a house, you can expect that one of the benefits will be that you can choose how you want the house to look including the yard, interior decor, and even keeping a pet, but these homeowner benefits come with obligations that renters are unfamiliar with.
New home purchasers may find property taxes, mortgages, local bylaws, and house maintenance to be challenging ideas to grasp. Before you contact a Realtor, it is important to evaluate your financial situation and set realistic expectations.
Buy or Rent?
Renting and buying a property both offer their own set of benefits and drawbacks. Aside from the financial expenditure, the most important consideration for a prospective home buyer is the major commitment that comes with owning a house.
Real estate can be a difficult asset to liquidate (low liquidity) depending on what type of market is going on. If it is a buyers’ market, then there is a surplus of homes on the market. If it is a sellers’ market, then almost any type of home can sell because there are more buyers than sellers in the marketplace.
Before you decide to enter the property market, be sure you know where you want to live, where you want to work, and that you will be content there for the foreseeable future. It will be important to also understand the condition of the market at that time.
There are times when it just does not make sense to enter the real estate market. This is the case when there has been a spike in average sale prices in a property type or if you will need to participate in multiple offers to secure a home. Multiple offer situations often push prices over market value.
Here are the differences between buying and renting
1. Buy a home
We know everyone wishes to have their own house; however, it is not always practical for many to buy a home due to several factors such as affordability and how long you plan to stay there.
If you plan to live in the home for a long time, then buying a home makes sense. You can look at the mortgage payment as a rent payment as you pay off the mortgage. At some point the payments will end and you will own your house outright.
One of the benefits of buying over renting is that you are building equity in your home. A home should be considered an investment. Your monthly mortgage payment goes towards building equity in your own home.
Owning a home gives you the option to customize your home as you see fit. You can paint, renovate, and add to your home as you wish. It is your home.
Home maintenance is the homeowner’s responsibility but with that responsibility comes the option to choose when repairs are done, and you can choose the parts and replacement appliances as you see fit.
With the low interest rates, we are enjoying you may find that your mortgage payment is smaller than your rent would be for a similar property.
You are in the real estate market which means that you will benefit from the growth of the market.
2. Rent a home
Renting offers many benefits. Yes, the downside is you do not own anything but there are several upsides to renting.
For starters, little upfront money is required. You will be required to pay a damage deposit, and possibly first and last month’s rent. Saving for a down payment will not be required.
If you were to purchase a home, then you would need to have a minimum of 5% of the asking price as a down payment. That down payment goes toward equity in the home, but it can be difficult for many people to save up money for the down payment.
Repair and maintenance costs will not be your responsibility. If you own your own house, then maintenance costs will come out of your pocket.
Amenities are free usually when you rent. So, if you have a building with a pool or gym you will not need to pay anything extra to use them. The use of the amenities would likely be included in your rent.
No real estate taxes need to be paid by a renter. As a renter, you will not be required to pay the annual property taxes or city utilities. Additionally, if you are renting in a condominium building, you will not need to pay the monthly strata fee. Strata fees go toward the upkeep of all the shared areas in the complex.
Can You Afford it?
When purchasing your first house, it is vital to keep in mind that you are making an investment that will probably grow in value over time. The real estate market in Nanaimo is steadily improving, with strong demand for properties from both locals and those migrating from other regions of Canada and the world.
For these reasons, it is ideal to start with a modest property and accumulate equity over time as the home rises in value. Making basic enhancements to the property, such as gardening, painting, and general upkeep along the way. You can consult with Altrua Financial if you want to take a mortgage loan or refinance your mortgage.
Financial Stress Test
The Canadian Mortgage Stress Test is a financial calculation that represents the maximum load that a bank will securely give you in the event of a sudden increase in interest rates. The Stress Test is a government-mandated standard that all lenders must follow for all homeowners seeking a mortgage.
Before you start looking for a property, go to your bank or call a private mortgage broker to find out how much you are pre-approved for.
Once you see what price range you qualify for it will help you to decide if you are able to buy a home or need to rent for a while longer
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