While home ownership is a good option to build future wealth, it is not for everybody. In the end, the decision to buy a home is a private one which depends on a number of factors, like your finances, future plans and overall comfort level. The good news is, professional real estate agents, mortgage brokers and real estate lawyers are there to help you before you dive in.
To help you start thinking about whether home ownership is ideal for you, here’s five important questions to ask yourself.
In order to purchase a house, you’ve got your up-front expenses, which may include things such as your deposit, down payment, home inspection and appraisal fees, home insurance, land transfer tax, title insurance, legal fees and moving expenses.
Then, there’s your ongoing costs that have property tax, routine upkeep, condo fees and utilities. If you’re saving some cash upfront by purchasing a fixer-upper, also factor in renovation costs.
Lenders evaluate your costs versus income to ascertain your mortgage qualification. Your Gross Debt Service ratio is your housing costs (mortgage principal and interest + property taxes + heat + 50 percent of your condominium fees (if applicable) divided by your pre-tax income. The outcome should be 32 percent or less. Lenders then look in the Total Debt Service ratio: all of debt (GDS + automobile payments + lien + additional loans + the remaining 50 percent of your condo fees) divided by your pre marital earnings. This is supposed to be less than 40 percent.
Think about this honestly. Is the business on an upward or downward trend? Speak to your boss to get some extra insight. Mortgage lenders like to see stable employment, and you will want to give proof of earnings in the shape of an employment letter or current pay stub, your position and length of employment, and in case you’re self-employed, Notices of Assessment from the Canada Revenue Agency for the previous two years.
Historically, real estate has been a fantastic long-term investment. Ask your parents how much they paid for their house 30 years ago, and compare that to the property’s value now. On the other hand, a fast sale may mean financial losses if the home’s appreciation does not exceed closing prices, which are estimated at 1.5 to five per cent of your home’s worth. Often, the magic number to stay in the home before placing it back on the market is just five years — thus the five-year plan.
Folks buy homes for a ton of different reasons. Home ownership is a method of forced savings for retirement and future generations, while also fulfilling the basic need of providing you shelter. It’s also a wonderful source of pride for all. Picture yourself in five years. Do you intend to relocate at some point? Where are you going to work? What’s your family structure? After that, consider how home ownership fits into your vision.
Home ownership is an enormous financial and emotional commitment, and a decision to not be made easily. The key is being honest about your answers. Then, when you’re ready to buy a home, work with a group of professionals including a financial pro, lawyer, and a real estate agent you trust, which can help to make your dream of home ownership come true.
This blog post is brought to you by Moody Properties. If you’re looking to find and purchase your dream home or sell your current one at a good price, speak to Monica Harmse or Lucas McCann of Moody Properties. They are the top rated Port Moody Realtors. They will get you in a home, in a community they love.