Just about every Canadian shares the dream of owning a home. And with interest rates low and house prices climbing ever higher in the GTA, many people feel pressured to jump into the housing market before it dries up.
Right now, real estate is undoubtedly a seller’s game. Between the dwindling home supply, soaring prices, bidding wars, and legislative changes, it’s tougher than ever for Canadian first time home buyers to enter this crowded market.
Many first time buyers in Canada are so busy wondering how they can buy in that they forget to ask themselves an even more important question: should I enter the market in the first place?
Before they phone the local realtor or hop on MLS, first time home buyers must ask themselves these three critical questions.
Can I Really Afford it?
This is the heart of the matter. Long-time renters relish the thought of putting their monthly cheques towards equity rather than the black hole of rent payments. But it’s never that simple.
Buying a home is not just a big down payment and a monthly mortgage. First time buyers are often shocked at the extra ‘hidden’ costs of home ownership. This includes closing costs (legal fees, sales tax, land transfer tax, etc.), property tax, monthly utility bills, home maintenance…
In short, it adds up quickly.
Don’t just speculate on these costs. Compare them to your current expenses as a renter and ask yourself: can I really afford to make the leap right now?
Can I Make the Down Payment?
What’s the lowest bar you need to pass to enter the market? Under Canadian law, home buyers must put down at least 5% of the purchase price on a down payment for a home valued at $500,000 or less. For homes above $500,000, the minimum is 5% for the first $500,000 and 10% for the remainder.
If you can’t make that payment, you can’t afford the house. You may have to adjust your spending, make a long-term savings plan, or borrow from your relatives. Regardless, it’s will take time.
Consider this an opportunity to think and re-think your decision to buy a home.
Does Buying a Home Make Sense for Me?
Your parents own a home. Some of your friends are settling down as well. Why shouldn’t you do the same?
Because for most people, a home is the single largest and most important purchase they will ever make. You have to make sure the time is right.
It’s not just a purchase. It’s a life event. Buying a home will impact the decisions you make in terms of family and career as well.
Do you plan on sticking with your current job? Could opportunities home up in a different city, or even a different province or country? Is there a chance you could get married in the next few years? Where does your partner want to live?
Moving is expensive, and there’s no way of knowing for sure what the housing market will look like down the line. Sellers are celebrating now, but that might not be the case in five, or two, or even a year from now. Make sure you’re ready to lay down roots before anchoring yourself to a home.
Here’s the Good News
You’ve made big decisions before. You’ve put thought into your education, your family life, and your career. You know how to sit down, take notes, do research and really think.
Do this you will make the right choice.
The housing market ebbs and flows, but it’ll always be there. Just because you don’t buy into the housing market today doesn’t mean you never will. Making a measured decision to delay your home purchase is more likely to pay off than thoughtless push to enter a tumultuous market today.