Is 2014 your year to buy real estate? Here are two simple ways to tell…
January 2nd, 2014 by smartHER Mortgages
There is great freedom and a sense of security in owning a home – but how can you tell if you’re ready?
There is great freedom and a sense of security in owning a home, but how can you tell if you’re ready? Here are two simple ways to tell if 2014 will be your year to become a homeowner…
2 ways to tell if you’re ready to become a homeowner
- Are you financially ready?
Calculate the potential mortgage payment, plus monthly property taxes (and strata fees if applicable) and add 10% for maintenance. For example:
- $1,200 mortgage + $200 taxes + $140 maintenance = $1,540 total projected monthly cost of being a homeowner
Now subtract what you are paying for rent. Let’s say your current rent is $1,200.
- $1,540 future expenses – $1,200 current rent = $340
If you can put the $340 difference away in savings for at least 6 months then you will know you can handle the financial commitment of home ownership. If your rent is higher than the cost of owning a home, the financial benefit of buying is clear.
- Are you ready to commit?
The TV shows are so exciting but selling a property quickly (and at a profit) is not often a reality these days. The longer you can commit to your purchase the better. Consider five years as the minimum; 10 years is even better. A 20 to 25-year commitment is better yet. After 20+ years you could have a clear title asset making you money each month, or a beautiful home to live in that costs you just taxes and maintenance. If you can’t commit to live in the property for the long haul, calculate if renting it out would be possible. Determine what the approximate rent would be and if it would cover the mortgage, taxes and maintenance. Now ask yourself: If there were to be a shortfall, would you be prepared to pay it? Make sure you have considered all the potential future scenarios and that you have an exit strategy if needed. If the property is a condo or townhome, make sure rental units are allowed. Ask yourself if you can handle being a landlord, too. There are good stories and bad.
Greed and fear have always been strong motivators, but they don’t give good guidance. FOMO – the ‘fear of missing out’ – is used in marketing, but FOMO is the last reason you should buy real estate. Review what your home ownership costs will be. Compare that number against your current rent. If you can rent a similar property for less than owning, renting may make more sense. If you can own for less than you pay in rent, it’s likely a good time to consider buying. If your personal numbers make sense, you’ve proven you can afford the payment. And if you feel ready for the commitment, then 2014 may just be the year to own a home of your own! Let me know if I can help or if you have any questions. Happy New Year! Susan Shannon, AMP SmartHer Mortgage Source :