There are many things to consider in making a decision to buy a home. If you agree with some or all of the following statements, you will probably want to read on:
"Generally, I have the self-control needed to save money"
"I'm ready to make a commitment to a stable lifestyle where I will be able to support the investment of a home."
"My credit rating is in good standing and I use credit wisely."
"I am interested in improving my family's quality of life."
"Pride of ownership is important to me and I would enjoy the challenges in improving my scope of knowledge."
Agreeing with these statements does not necessarily mean you should rush out and buy a home. After all, you may believe that living in rented accommodation and buying mutual funds is just as good an investment. Furthermore, you may think this is not the time to enter the real estate market. Let me address each issue in turn.
Let's first compare two couples named the 'Renters' and the 'Owners'. The 'Renters' rent a home for $750 a month and the rent increases 5% each year. After 25 years they will be paying $2400 per month and they will have paid $430,000 in total with nothing to show for their accommodation expenditures.
On the other hand, the 'Owners' buy a home for $145,000 and, on average, it appreciates 5% per year. At the end of the same 25 years the 'Owners' will have a property worth $470,000 and no mortgage.
Now a mutual fund salesperson would likely argue that he or she could compete with this situation, but a good REALTOR® would inevitably want to draw your attention to "leveraging" and your ability to increase your financial position many times over (i.e., by putting down 5 to 10% but getting 5% appreciation on the full $145,000). In addition, by opting for a better payment schedule you could pay your mortgage off several years quicker i.e., with bi-weekly payments. Would you agree that this sounds attractive?
As for the right time to enter the real estate market, if anyone knew that they would be worth their weight in gold, or perhaps even platinum! The right time to enter the real estate market varies from person to person and is not necessarily driven by national or local economic conditions, or seasonal swings in the market place. The right time to buy depends on two criteria; first, when you have made the commitment to stop paying for accommodation and to start investing in your future and, second, when you have found a home that you can truly afford and that meets your present needs.
While owning a home is a common goal for most Canadians, the timing is different for everyone. You will know when the time is right and, in the meantime, keep educating yourself for your future purchase.
David Weir BA, CD is a Broker with Royal LePage ProAlliance Realty, Brokerage in Trenton. His sales in the Quinte area have ranked him in the Top 1% of all Royal LePage REALTORS® in Canada since 2005.