With the new year looking for lucrative returns the biggest dilemma is to rent or buy? Although Canadians are optimistic about the economy, yet thinking about real estate is a big financial decision and can be based on several mathematical calculations. Although real estate professionals would recommend buying. However it is important you are financially ready, which is why we always recommend getting your pre-approval in order – this way you know the status of your financial situation and budget.
Once that question is answered you must have answers to the following five questions:
Ask yourself the following questions to determine if you are ready to buy, or if should you continue renting.
1.How much can you afford?
To answer this question you will need to have all the information about your financial ability and buying power!
- Do you have any idea what your credit score is?
- How about your debt-ratio- how much debt are you actually carrying considering your income.
- Do you have a source for your down payment?
Once you have answers for all the above requirements now its time to review your further real estate buying vs. renting essential options and create a plan of action pertaining to your budget for purchasing your home.
2. How long do you plan to you stay in the same neighborhood?
It is important to understand the location stagnancy aspect in your life. The recommended time is five years, as this is the minimum time frame you will need to“break even” with your new home. If you need to move sooner its better to rent as if you choose to buy there has to be a commitment and you may face with high penalties for breaking a mortgage and you may not get the most return on your investment, having built little equity in the property.
3. How much do you want to wait to afford your dream real estate?
Five years is again the minimum frame; however if this a starter home, and then move up to a larger one, don’t forget to estimate the returns. Also keep in mind to consider schools and other areas in the neighbourhood.
4. Do you have a contingency fund for extra real estate expenses?
Make sure when you are planning to buy a home, you also have a contingency plan of action in place to cover the extra expenses. Remember that you need to take care of paying taxes, insurance, utilities and any unforeseen repairs. Having an extra cushion of savings beforehand, will mean you are ahead of the game!
5. Are you ready for the emergency real estate repair?
Make arrangements for emergency repairs. How will things be handled if the furnace goes out or the refrigerator dies. Are you ready to deal with the unexpected responsibilities? There does come a time where renting will be more expensive than owning, especially if you are looking for more space. If you do feel ready, and can afford a home, then definitely start shopping!
That’s all now that you have estimated everything and organised contingency issues its time to relax and cherish your decision and resolve the buying vs. selling dilemma. Don’t forget to leave a comment and share our handy tips.