So you have never owned a home and you are trying to decide whether it is better to rent or to purchase? There are many things to consider.

It is a question of affordability and timeframes. Of course, it is always better in the long run to own vs. rent, this goes without saying, but can you afford the risks and does the timing make sense?

Things to consider:

  1. Have you saved 10-20% of the home price or is it available from the “Bank of Mom and Dad” for your down payment?
    • With a 10% down payment you can certainly be approved for a mortgage, but there are extra costs on closing such as CMHC insurance for high ratio mortgages, which can be significant
  2. Do you have money put aside for closing costs?
    • Legal fees
    • land transfer tax
    • Immediate repairs or modifications that are needed for you; for example, a fence for a dog if you are a dog owner
    • CMHC insurance
  3. Are you able to maintain your total debt servicing costs less than 40% of your net income?
  4. Can 50-60% of your income cover your costs of living?
    • Groceries
    • Toiletries
    • Clothes
    • Entertainment
    • Gifts
    • Savings
    • Etc.
  5. Will you be able to afford to put aside 1-2% of the home value per year for ongoing maintenance as a reserve?
    Homes need maintenance and things come up over time such as:

    • Windows
    • Furnace
    • Air conditioner
    • Appliances
    • Painting and carpets
    • General wear and tear
    • Pest control
    • Etc.
  6. Are you planning to stay in your home for at least the next 3-5 years?
    • Commission costs to sell
    • Time for the market to go up to cover all upfront costs and renovations before selling again
  7. Are you confident with your current employment?
    • Job loss and income loss are one of the largest risk factors for home ownership
  8. Are you “ready” to own a home?
    • It is a huge commitment with many rewards
    • If 2 people are buying together, you both need to be on the same page with this
    • Family planning can change needs, consider this upfront