Chapter 1 – Are You Ready to Own a Home?

ARE YOU READY TO OWN A HOME?

Buying a home is a big decision and it’s important that you fully understand the financial commitment you are making. It is important to take your time during the process – do not rush! To make sure you make the best decision for yourself, ask yourself a few questions. What are you really looking for in a home? What is your current financial situation? Are you prepared to adjust your lifestyle and budgets to accommodate the increased costs of homeownership?

Renting vs. Owning

Many people dream of one day owning their own home. But this dream may not be for everyone. Buying a home is a lifestyle choice that may or may not be right for you.

Like with anything in life, renting and owning a property come with their own pros and cons. We’ve outlined some here for you to consider so that you can start to think about what makes the most sense for you. It’s a good idea to also make your own list of pros and cons to make the best choice for your personal situation.

Renting		Owning
Pros	Cons	Pros	Cons
Less maintenance and repairs	Rent payments may increase annually	You are securing yourself a valuable asset and long-term investment	Risk of financial loss based on the housing market
Shorter-term commitment – more flexibility to move to a new home, neighbourhood, or city	You are paying someone else’s mortgage rather than building your own equity in the property	As you pay down your mortgage and the value of your home increases, you are building equity in your home that you can use to buy properties or to renovate	Substantial debt and the added financial responsibility of ongoing costs associated with homeownership
Financial freedom – you won’t have a mortgage	Cannot alter the property to suit your taste (paint, remodelling, etc.) without permission	Stability and peace of mind that comes with owning the home in which you live	Monthly payments can increase substantially based on mortgage interest rates
Ability to rent in an area you may not necessarily be able to afford to buy-in	A landlord has the right to not renew your lease – forcing you to find a new place to live	Potential for rental income (e.g. basement apartments, etc.)	Possibility of unexpected and costly repairs
Monthly rent stays constant during the duration of the lease

There are advantages and disadvantages to both renting and owning a home. It’s ultimately up to you to decide which is the best option based on your needs and long-term goals.

Costs of Homeownership

So, you’ve decided that buying a home is the right next step. Let’s consider some other costs of homeownership that you may have overlooked.

Upfront costs

• To buy a home, you will need sufficient funds for a down payment. In Canada, the minimum down payment required varies based on the purchase price of the property.

Purchase price of your home	The minimum amount of down payment
$500,000 or less	5% of the purchase price
$500,001 to $999,999	5% of the first $500,000 of the purchase price PLUS 10% of the portion of the purchase price above $500,000 Example: Jack and Jill want to purchase a home for $650,000. To determine their down payment: 5% of $500,000 = $25,000 10% of $150,000 = $15,000 Total down payment = $40,000   Jack and Jill will need at least $40,000 as a down payment.
$1 million or greater	20% of the purchase price

• You should also budget for the costs associated with closing the property (land transfer tax, legal fees, costs associated with setting up your mortgage, etc.) as well as any applicable taxes.

Ongoing costs

• The continued costs of homeownership, such as mortgage payments, property taxes, insurance, utility bills, condominium fees (if applicable), and routine repair and maintenance.

Major repairs

• You should also budget for major repairs and maintenance, such as roof replacements or foundation repairs. These repairs may come at unexpected times, so it’s a good idea to create an emergency fund to cover these expenses. It is generally recommended to contribute 5% of your income to an emergency fund each month.

Are you ready to own a home?

• Are you financially stable?
• Do you have the discipline and responsibility to handle large purchases?
• Are you aware of all the costs and responsibilities that come with homeownership?
• Are you ready to set aside time for the maintenance and upkeep of your home?

Still, think that homeownership is the right next step? Great! Let’s get started with the process of finding and buying your dream home!