Moving into your first home is an exciting step in your life. Perhaps you have recently finished school and you are on your way down a bright new career path. You are likely excited for the freedom that having your own place will bring but may feel a bit intimidated by the new responsibilities you will have and by the various choices that you will have to make. One of the first choices you will have to make when striking out on your own is whether to rent or buy your first home.
Unfortunately, there is no simple answer to that question. It is going to depend on a number of factors related to your unique circumstance, but in this blog we are going to try and go through some of those factors to help you decide whether renting or buying is the best option for you.
Reasons you should rent your first home
- You don’t plan on staying in one place for long. If you have a job where you expect a transfer in a few years or you are considering changing cities in the near future, then renting is often your best choice. When you purchase a home, there are many other expenses than your mortgage payments. These include appraisal fees, closing costs etc. To pay these costs multiple times within only a few years can make owning considerably more expensive.
- You haven’t saved up a down payment. If you haven’t saved at least 5% it will be difficult to get a good rate on a mortgage. Also, the ability to save a down payment is a good indicator of whether or not you are ready to manage all the additional expenses that come with owning your own home.
- You can’t pass the financial stress test. In January of 2018, the federal government introduced a financial stress test that borrowers must pass to get a home loan from a federally regulated institution. The stress test measures whether prospective home owners would still be able to make their mortgage payments in the event of a rate increase.
Reasons you should buy your first home.
- Homes are a great investment. Over time, homes tend to increase in value. That means that as you are paying down your mortgage, you are gaining equity in your home. Down the road, you will have the option to borrow from this equity or sell your home for a tidy profit.
- You will have less expenses in retirement. Think about how much you would have to pay in rent. Now imagine what your life would be if you had that amount in your pocket instead. That is what it is like once your mortgage is paid off. How would your lifestyle change if you had upwards of $5000 or more discretionary money every month?
- You can choose your own upgrades. When you rent, you are limited in what you can do to the home. You may be able to change the paint colour on the wall, but most landlords wouldn’t want you to install a hot tub. If you own your home, you are free to make whatever upgrades you choose within the cities bylaws of course.
As you can see, both renting and buying have their advantages and at Adelson & Weiss, we can help you with both! Contact us today to learn more.