When it comes to staying put in your rental or taking the leap into home ownership, how do you decide what’s best for you? Start by asking yourself these 5 questions:
1. Can I afford to stop renting and buy something?
That’s the big question. With skyrocketing property prices, we get it – affordability is a huge stumbling block. But keep in mind that rents in Toronto keep hitting new records, giving first-timers a lot more incentive to buy (even if it’s something small, outside the city or even shared with other buyers) and put money in their own pockets instead of paying someone else’s mortgage.
But when you’re getting a handle on affordability, there are few things to consider on top of the first-glance price tag on a new home. On top of more obvious things like your down payment and mortgage payments, you need to factor in condo maintenance fees, land transfer taxes, property taxes, legal expenses, closing costs and upkeep.
2. What are my long-term goals?
What do the next couple of years look like for you? Not sure you’ll be staying in Toronto? Then continuing to rent is probably a smart choice – it’s easier to end a lease than sell a property. But if you’re planning to stick around, buying something is worth considering. Even if it’s not your “forever home,” you’ll reap the rewards of appreciation and growing home equity.
If renting is the right choice for you in the long term, great. But if you do intend to buy eventually, jumping in sooner rather than later is a good idea.
3. How much and what kind of debt am I carrying?
If you have a bunch of high-interest loans, pay 'em off before you even start looking. You’ll want to get pre-approved before you start your search, and lenders look closely at the amount and type of debt you have, and a lot of credit card debt sends up a red flag.
4. How do I feel about risk?
There are risks to both scenarios. If you’re a renter, your financial risk is low: all you’re responsible for is rent. But there's a risk to your stability: being able to stay in your home depends on someone else. If your landlord wants to have a family member move in or they decide it’s a good time to sell, you’re out of luck...and out of a home.
For buyers, it’s the opposite. Owning your home means stability: if you keep paying your mortgage, no one can kick you out. But buying a home for the first time is a huge financial commitment: some people might see that as a risk, especially as prices skyrocket. Right now a lot of people are wondering “will property values drop after I buy?”
Even if there is a bit of a drop, that doesn’t mean you lose money. If you look at GTA numbers over the years, values have gone up consistently despite economic fluctuations. The key is to look at your purchase as a long-term investment. Prices may go up and down year to year, but if you wait 5 or more years, your property will appreciate.
Plus, even if you do sell for less than you bought for, you’ll still recoup most of your investment, while rent is money you’ll never get back.
5. How much freedom do I want with my home?
Do you love to renovate and decorate? Renters can't do much without their landlord’s permission. And even if you do get the okay, you’re sinking your money into someone else's property. Apart from the enjoyment you get from the upgrade, you won't get a penny back.
When you own a home, however, you’re the boss. Want to paint your bedroom black? Go for it. Install new kitchen cupboards? You can! Whatever you pay is an investment in the value of your home.
Is home ownership right for you right now?
Check out our First-time buyers hub to get the answers you need. There’s a ton of helpful info from figuring out how much you can afford, to assembling a great team, to navigating bidding wars.