Megann  Willson

Megann Willson

Real Estate Agent

HomeLife/Realty One Ltd., Brokerage

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How do you know if you're ready to buy a home?

Condo building

Are you ready to buy a home? If you’ve been thinking about this question, one thing to do is to make a simple dollars-and-cents comparison. 

Rents keep going up, and up. And they’ll continue to do so for as long as you are renting. That monthly rent payment goes into your landlord's pocket. It helps the landlord to build equity and deduct expenses needed to maintain or improve the property. After 5 years of paying rent, you don't have much to show for it....but your landlord does. On the other hand, the only time your mortgage payments will go up is when interest rates change, or if you decide to refinance.

What if you decided to make a purchase instead? Then, your monthly home payment goes to your lender and reduces your loan balance. You also can get two things you never see as a renter: home equity and tax benefits. From this perspective, the question is whether you want to pay to borrow something or pay to own something.

There are, of course, other reasons to keep renting. When you rent, most of the maintenance is taken care of by the landlord. (Conversely, the landlord will pass as much of this as possible along, in the form of rent increases). You have more flexibility if you need to move because of a transfer, or to pursue an opportunity. Give the appropriate notice, and you can go. Or you haven’t saved up enough of a down payment to get started on the property ladder. 

On the other hand, home ownership brings with it, a host of benefits. First, you can decorate almost any way you like, within reason. Condo boards and local bylaws and covenants may impose some guidelines on this front. Beside the appearance of your property, renovations to the structure may be possible (in a detached or semi-detached home). Every improvement you make adds equity to the home, increasing its value for when you do decide to sell in future. There may even be potential to increase your income, by adding a secondary suite or laneway home. Lastly, the security of knowing that only you can decide when it’s time for you to move, cannot be understated.

If you’re philosophically ready, because arguments like this make sense to you, what else do you need to do, to know that you’re ready to buy? 

  1. Meet with a mortgage agent - they’ll investigate several lenders for you, and help you select the best one to suit your specific situations, or let you know if you need to keep saving to meet your price target.
  2. Make a list of what is a necessity, and what’s nice-to-have.
  3. Do your research and make sure you understand things like how mortgages work (the basics) and what other money you will need, beyond the down payment (generally these are called closing costs). 
  4. Consider geography, schools, and your plans for the next five years. It will take that long in most cases to start turning a profit, despite the flipping shows you see on TV.
  5. Ensure you have a down payment - preferably at least 20% of the value of the property you intend to buy. Less than 20% is possible, but it will end up costing you in terms of mortgage insurance.
  6. Find a great real estate agent who you can trust, and be open with them about your plans. There are no bad questions, and even your unique or special questions help us to know you and your needs a bit better. Communicate, communicate, communicate.
  7. Enlist your agent’s help in assembling your support team - a lawyer, a home inspector, a contractor, and more. 

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