If you've been considering buying a house but you're still unsure, consider some of the personal and economic conditions that favor home purchases. If you find that a number of these signs ring true for you, it might be time to contact a real estate agent and start shopping.
1. You're Ready to Commit
First and foremost, if you're not ready to commit to owning a home, you should not buy a house. Home ownership comes with a plethora of responsibilities, including home maintenance, property taxes and the process of selling the property when it comes time to move.
Legal fees, moving expenses, and all of the incidental costs associated with buying a home can really add up. To make the most of these costs, it's best to plan on living in your new home for a stretch of time. Consider whether you have a stable job that will provide a solid income for a mortgage, and if there's any chance you'll have to relocate in the near future. If you feel you can commit to sticking with a home for at least five years, then it might be just the right time for you to buy. If you're typically a hardened commitment-phobe, remember that you can sell or rent your property if your situation changes dramatically.
2. Owning Costs Less than Renting
If you've examined your budget and realized that your monthly payments associated with buying a home are less than you're currently paying in rent, it's time to consider a home purchase. Talk to your bank and look at what your mortgage payments would be for a variety of different properties and gauge what you can afford. Factor in any additional costs you may have to pay, such as condominium fees or extra utility bills, and compare your total costs to what you're paying in rent. If it's roughly the same or less, you could be saving money by purchasing a home - plus there's the added benefit that you'll be putting your monthly home expenditures toward your own home equity!
3. Buyer's Market
When demand for housing is low and there's a wealth of properties on the market that aren't moving too fast, that's known as a buyer's market. You'll have a lot more bargaining power under these conditions than if you're buying in a seller's market, which is when demand for homes is high, resulting in few properties on the market that are selling fast. In a buyer's market, chances are you'll be able to negotiate a seller's list price down - sometimes quite substantially - and save yourself a lot of money in the process.
4. Low Interest Rates
When interest rates are low, it's a great time to look at buying a home. You will be able to get a reasonable interest rate on your mortgage loan, which can save you a lot of money in the long run. A home is generally the single largest purchase anyone makes, and the amount of interest tacked onto a mortgage really adds up over the years that you're repaying the loan. Even a difference of a fraction of a percentage point can make a pretty big difference over the long term. Consider a mortgage of $220,000. The difference between a rate of 4.2 per cent and 4.5 per cent results in an extra $13,993 paid toward interest over the course of a 30-year mortgage. That's a lot more than just pocket change.
5. Adequate Funds for A Down Payment
Having a hefty down payment helps in the same way as finding a low interest rate. Ultimately, the less you owe, the less you'll have to repay and the less you'll have to tack on for interest. If you find yourself with a nice lump of cash, putting it toward a home purchase is definitely a solid financial investment. Just think, you'll be building equity in your home which you'll see again when you sell, and you'll have somewhere to live in the meantime. Though it may be tempting to put the money toward a trip, a new car or a luxury shopping spree, the return on investment on these sorts of purchases - at least in the strict financial sense - can be rather disappointing.
During the springtime, more house listings tend to come on the market. With the poor winter weather over and the kids nearly done school for another year, this seems to be the time when most people are willing to take on a move. Having more homes on the market means a wider selection - and a greater ability to negotiate price. However, this is also the time of year when more buyers are in the market. Circumstances will depend on your particular market conditions, but the arrival of spring typically revives the real estate market after quieter winters. Alternatively, if you're willing to move during the winter months, sometimes owners of homes that have been sitting on the market for a long time are more willing to negotiate.
The Bottom Line
Occasionally, timing the buying or selling of your home may not be within your control, however, if you do have the opportunity to choose when you enter the market, doing it at the right time can save you a lot of money. Always remember that buying a home is a big commitment, so at the very minimum, you should never purchase a home without being completely sure that you're ready to take on the responsibility. If you're ready to commit and you find yourself with a number of other favorable factors like a low interest rate and a good sum of money you can put toward a down payment, then it's probably a great time to take the plunge!
Source: Globe & Mail (Janet Fowler) June 2011.