With the real estate market having gone a little nuts and house prices having risen exponentially in the past few years in Collingwood and the Blue Mountains area, potential homebuyers are asking themselves if buying a home is worth it for them. Some analysts predict a housing crash, while some say the real estate market is stable and will continue to rise. No one can know for sure, so the question whether to buy a home or to rent is a tough one with no right or wrong answer.
Your grandfather and your father were always told that owning a piece of property was a way to make your way in the world. But, the prices for houses in their day were much lower. Even still, there is only so much land and that alone should tell buyers that the prices for it will only rise, regardless of what the market does. If you are buying a home in Collingwood as a long-term investment, any lags or drops in the market will correct themselves over the life-cycle of your home. While the major cities of Vancouver and Toronto are red-hot, some markets outside of these cities are actually dropping, so rather than listen to sensationalistic news reports, it is best to do your research on your actual market.
Ask yourself these Key Questions
When deciding if you should rent or buy, you need to ask yourself some questions regarding your finances and your future.
Where do I want to be in five years?
If your future is uncertain (in terms of jobs, relationships, family, location), renting could be a better option for you, as it offers the flexibility of moving easily without sacrificing or jeopardizing your investment.
How much can I afford?
You know basically where you want to live, but can you afford the mortgage payments for a home in that area? If you can, buy a home, even on the lower-end of the scale is worthwhile. You don’t want to stretch your budget to the max, but paying yourself instead of someone else’s mortgage definitely makes more sense.
How much do I have for a down payment and closing costs?
In order to buy a home, you need at least 5% for a down payment, plus another 1 to 2% of the total purchase price for closing costs. On a $300,000 home purchase, you need at least $18,000 in your bank account (or RRSP) up front in order to buy a home. If you don’t have this, continue saving while renting.
How much more will Home Ownership cost than renting?
Depending on what you pay on rent, buying a home will cost you a little bit more than paying a mortgage, property taxes and other related costs of owning a home. Mortgage rates are low right now, but are going to rise in the next few years, so your interest costs are technically as low as they can be on a mortgage loan. Use a rent or buy calculator to figure out the cost of each.
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