There comes a point in nearly everyone's life when they begin to wonder if they should continue to rent or make the step of purchasing a home - add a global pandemic, low mortgage rates and a booming housing market into the mix, and it can make this decision even more complicated. But even as the world continues to battle COVID-19, home sales in Canada are on the rise. In fact, September 2020 marked a record in national home sales and prices across Canada.1
If you’re thinking about buying a home, don’t let what’s happening in the world make this an emotional decision. Buying a home should be based on your finances and your preparedness for owning a home. Before you make any real estate purchase, you should strongly evaluate your options to figure out if you are really ready to buy.
What’s Going On With the Housing Market?
At the beginning of the pandemic, the real estate market saw a shift in demand. Fears of contracting the virus saw interest in detached, single-family homes rise while demand for apartments and attached housing decrease. As COVID-19 continues, the housing market continues to see growth - many young couples have been eager to flee from cities as interest rates dropped and prices rose.
The Canadian Real Estate Association said that 33 percent more homes were sold in the fall of 2020 than in the same period in 2019.2
As the pandemic continues, some economists are predicting that home prices will drop in 2021.3 If you’re considering taking the leap and buying a home in these tumultuous times, what should you consider?
Can You Afford a Down Payment?
The circumstances of the coronavirus have many people itching to purchase homes - but you need to be realistic about your resources. While there are a few different mortgage financing options that require a low down payment, it's not very likely that you'll be able to buy a home without any money to put down.
If you do not have the money to put down for the purchase of a home (plus closing costs), it may be beneficial to wait and reevaluate your situation. If you are still eager to buy a home, take some time to save for the down payment and wait for the housing market to stabilize. The more you can save up in the beginning, the more you will save in the long run over the lifetime of a mortgage.
Are You Planning to Stay Awhile?
Do you envision yourself settling down, or do you want out of where you are now? If you are unsure of whether or not you want to remain in a particular area for a while, then you may want to hold off on buying a home. Buying a home is a big transaction, and unlike renting, it is not in your best interest to move every couple of years.
Alternatively, you may have been thinking about making the move for a long time. If that’s the case, you may want to take advantage of the low mortgage rates we’re currently seeing across the country. Really think about your motivations for buying before doing so.
Can You Afford All the Costs of Home Ownership?
There is much more to owning a home than paying the mortgage every month. Don’t be deceived by declining prices and low rates. In addition to that, you will need to pay for taxes on the property, your insurance and any repairs. As a renter, your landlord is responsible for many of the costs that you would need to take on once becoming a homeowner. What if your water heater breaks during the coldest part of winter? What if a pipe bursts? Just because you have enough to buy a house in this market doesn’t mean you should. You should be prepared to handle the risks of homeowning by having enough savings in place.
Buying a home is a big investment and an important step in life. But before leaving your rental situation, take the time to fully consider your options and prepare for all of the financial responsibilities you will face as a homeowner for many years to come. Despite the housing market’s current boom, some of these advantages are rooted in uncertainty - which means you need to be comfortable and well-prepared if you decide to buy a home.
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