It’s exciting to hear your friend talk about the new condo he just moved into. You want to have a place of your own too, someday. But just as you begin to get lost in the fantasy over your own home, you are reminded of the people who get submerged in the costs of their mortgage monthly payments and other ongoing costs after they’ve bought the house – the house-poor.
So, should you rent or buy? A buying a house checklist can help you decide.
Short-term vs. Long-term budget
You have to first consider your financial situation. You might have your eyes set on buying a house in a particular neighbourhood, or a condo with state-of-the-art amenities, but you might not be able to afford that for now. Renting a house could be a valid short term option in this scenario. In the long run though, buying a house is an excellent choice from a financial perspective. The money that you spend on rent can go towards equity on your home, not to mention the additional appreciation that you will get over time. It’s an investment that often pays out well in the future.
Are You Ready To Settle?
Be sure that you’ll be staying in a single city or neighborhood for at least the next 5 years. Otherwise, renting might be a good option. This is because the added costs of moving from one place to another might be substantial especially if you’re making the move before the 5 year mark. Consider the fact that you might still have a mortgage over your head during this period, and incurring costs upon costs might not be so smart!
Fully Utilize Online Real Estate Tools
To get a better idea of your situation, you can use mortgage affordability calculator to get an assessment of how much you can afford to spend on a home right now. They can provide a realistic guide on what you can afford to buy and help you to make the choice of either buying or renting a home on the basis of your budget. Are you in love with a house that’s way over your budget? Maybe it’s better to rent and save up for a while longer. With the aid of these online tools, you can easily work out your available options.
Tax Benefits from Buying A Home
If you buy a home as a primary residence, you can benefit from certain tax benefits. In Canada, if you have lived in the home since you bought it, any appreciation you get from the sale is not taxed at all. In the US, there is an exemption for a certain amount of gains from the sale of a primary residence, allowing you to keep most, if not all, of your gains tax-free.
The decision of either renting or buying a home is one that can’t be made on a whim and there is no one size fits all approach to making a choice. After carefully weighing the points raised in this article, you should be able to make a decision on which one suits your needs most right now. You can always use online tools and guides to help you make a final decision.