Renting Vs Buying,  Are You Ready to Purchase?

There are many factors to consider when deciding if you should buy your own home or continue to rent.  In order to get your thought process clear, here are some things that you should consider:

• Do You Plan to Move Often?  If you plan to move every couple of years, then it's probably best that you continue to rent.  When you buy and sell your home, there are significant costs that you incur.  Unless your home's value increases by a minimum of 10% (on average a home value will increase 3-5% annually), you will have lost money.

• Do You Have Stable Employment?  Owning and maintaining your home demands that you meet your monthly payments.  These payments include mortgage, property taxes, utilities, insurance and maintenance.  It's a sign of trouble if one of these payments are missed.  So, if you do not have a steady income the answer here is:  continue to rent.

• What can you afford?  Take pen to paper and start working your numbers.  Begin with preparing a Household Budget.  As a rule, banks will permit your total housing costs to equal 33% of your gross income.  These costs might include your mortgage payment (or rent), property taxes, monthly utilities and, if you're considering a condominium, 50% of the condo fees.  IF your total debt service (this includes the above housing costs in addition to your current monthly debt payments) exceeds 40% of your gross monthly income, it is likely that you will not qualify for a mortgage.

• Will you continue to save some money every month?  When owning a home you should always have a "rainy day fund" for those "emergencies".  If your budget is stretched too far and you are unable to save anything, like you have been while renting, then you might want to reconsider purchasing a home.  For now. 

• Have you got all the facts?  Let's work the math using the scenario of renting a townhouse versus buying the townhouse. Below is a table outlining the cost of renting and cost of buying.  So, for example, if you were to buy this 1000 square foot townhouse for $90,000 at 8% with 10% down, condominium fees at $150.00 per month and property taxes of $100.00 per month, here is how the numbers work.

As you see, just looking at this example, there's a compelling argument to jump into home ownership.  However, this is only telling part of the story.  You still need to consider maintenance and upkeep of your home.  On average you would assume 2% of the purchase price per month to be allocated for maintenance.  With the above example, this works out to an additional $150.00.

• There's one more thing:  Closing Costs.  You will need to ensure that you have the correct amount of money to close the transaction on the purchase of your new home.  Best practice is calculate approximately 5% of the purchase price (using the above example your closing costs would be $4,500.00) to cover the following:  Land Transfer Tax, Legal Fees and other miscellaneous expenditures like a truck rental and Pizza and Pops for all your friends who help you move.

Remember, to get the process started and to understand the steps involved, it's ALWAYS best to speak to a professional.  As your Real Estate Professionals, we will ensure you have ALL the current information, answer all your questions and give you the advice you need to hear...NOT the advice you want to hear.

Call us today to get the dialogue started...we look forward to hearing from you!