Should you continue to rent or consider buying your own home? Deciding which is right for you requires careful consideration. While apartment living may have become tiresome, and you may be sick of paying out money to live when you could be investing in a nice home, the freedoms and joys associated with home ownership need to be weighed against the financial costs or gains. The truth is that purchasing a home is probably going to require going into debt. And, it is also going to mean taking all or part of your nest egg and using it to make a down payment.
To make a sound financial decision on whether to continue to rent or to buy, the first step is to determine whether you have enough cash on hand to make a down payment of at least 5%. Next, you’ll want to calculate all the additional fees and costs associated with purchasing a home. These costs include origination fees, property taxes, closing costs, maintenance or association fees, sales commission costs and if applicable, mortgage insurance. Once you have this information gathered, you’ll want to combine it with the purchase price, interest rate, the term of the loan, expected home appreciation and inflation rates. Once you have a clear picture of what buying a home would mean in terms of financial gain, you’ll want to measure that against the cost or gain of staying in an apartment. In other words, if you took the same amount required for closing and down payments and invested or saved them instead, how would your financial gain look when compared to making an investment in a new home?
CompareMyRates.ca has developed a rent vs. buy calculator to the help you sort through the fees, taxes and additional monthly expenses so you can make a sound financial decision.