If you’re renting, you may be wondering if it’s worth buying a home right now given the current market. Are there benefits to buying, even though the amount up front is more than paying rent? Let’s break down the most common home-buying myths.
It’s more expensive to buy
It’s true that buying a home—whether a house or condominium—is more expensive upfront since you’ll likely want a 20% down payment. However, in most cases, home ownership pays off—think of your mortgage payments as an investment you can benefit from in the long term, instead of paying a landlord
Need a little help? The Government of Canada also offers first-time home buyers incentives and rebates.
I’ll never be able to save money ever again
It’s hard to hand over your savings for a down payment, but it’s possible to rebuild with smart financial planning and time. Consider diverting part of your pay cheque directly into savings, or use an advisor who can create a wealth-building plan that works for you.
There’s nothing in my price range
While it’s true the housing market has reached record-breaking numbers, owning property may mean adjusting your expectations. Does your price range work in another city or area? What about a smaller or different type of property? Work with a trusted agent to discover your options.
The perfect house is waiting for me
We all have to lower our expectations when purchasing our first property. Instead, decide which features—location, outdoor space, number of bedrooms, etc.—are most important. You can renovate and redecorate to make any space feel like home, and remember that your first property is a stepping stone to your dream house.
I’m too young. What if I want to move after I buy?
If you have the financial means to get into the market but aren’t committed to staying put long-term, consider buying a home that can transition into a rental property. Renting it out can provide income while giving you freedom to live elsewhere.
My credit isn’t good enough
Check your credit score before applying for a mortgage. If it’s lower than 600, you won’t secure a loan from a big Canadian bank. Then, work to raise your score—this also gives you time to save. A larger down payment is a good indicator to lenders of financial responsibility, as is stable employment. You can also try a private or subprime lender, though their rates will be higher.
The mortgage payments will be too high
First, try using a mortgage calculator to get a sense of potential payments with your budget. Don’t forget, that a larger down payment and extending the length of your mortgage (the amortization) also help lower your payments. Another option is an interest-only mortgage, where you can choose to only pay off the interest accrued each month.
I should wait until the market drops to buy
While the recent Bank of Canada interest rate hike may help cool the market, demand for housing is still outpacing supply, and experts predict we’ll continue to see an increase in the average home price. Waiting for the market to drop doesn’t usually pay off.
Ready to make the switch from renting to owning? Contact our team today.
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