5 Things You Should Consider Before Buying Your First Home?
1. How long will you live there?
If you purchase a home and get a job transfer or decide to move after only a short time, it may end up costing money in order to sell it. The value of your home may not have appreciated enough to cover the costs that you paid to buy the home and the costs that it would take you to sell your home.
The length of time that it will take to cover those costs depends on various economic factors in the area of the home. Most parts of the country we have been experiencing only a modest appreciation per year! In the neighbourhood on -2%. In this case, you should plan to keep your home at least 5 years to cover buying and selling costs. If the area you buy your home in experiences an economic up turn, the length of the time to cover these costs could be shortened, and the opposite is also true. If you think moving sooner is a possibility, you could still consider buying now and perhaps renting the home if you relocate until market increases.
2. How long the home will meet your needs.
What features do you require in a home to satisfy your lifestyle now? Five years from now? Depending on how long you plan to stay in your home, you’ll need to ensure that the home has the amenities that you’ll need. For example, a two-bedroom dwelling may be perfect for a young couple with no children. However, if they start a family, they could quickly outgrow the space. Therefore, they should consider a home with room to grow. Could the basement be turned into a den and extra bedrooms? Could the attic be turned into a master suite? Having an idea of what you’ll need will help you find a home that will satisfy you for years to come.
3. Your financial health – your credit and home affordability.
Is now the right time financially for you to buy a home? Would you rate your financial picture as healthy? The best approach is to simply make an appointment with a mortgage broker and go through the pre-approval process. It costs nothing to do this and you will know in just a few days how much mortgage you could qualify for and the exact costs involved. To get a quick look at how much a mortgage would be check out our RE/ MAX Mortgage Calculator
4. Where the money for the transaction will come from.
Typically homebuyers will need some money for a down payment and closing costs. Banking rules in Canada at present require buyers to have 5% down. If you don’t have that much in your ‘house account’ perhaps a family member will give you a gift or you can access your your RRSPs through the RRSP First-Time Homebuyers Program that allows you to borrow from your RRSP without penalty. (Link or video) Be sure to talk to the mortgage broker about where your down payment and other closing costs are coming from.
5. The ongoing costs of home ownership.
Maintenance, improvements, taxes and insurance are all costs that are added to a monthly house payment. If you buy a condominium, townhouse or in certain communities, you will most likely have a strata fee that covers some of that insurance and maintenance. If these additional costs are a concern, you can make choices to lower or avoid these fees. Be sure to make us and your lender aware of your desire to limit these costs.
If you are still unsure if you should buy a home after making these considerations, you may want to consult with an accountant or financial planner to help you assess how a home purchase fits into your overall financial goals.