Are You Really Ready to Buy a Home?

I believe there are a lot of benefits to being a homeowner—having a space to call your own, being able to make changes so it becomes exactly what you envision, and building up equity in your home over the years. These are just some of the advantages that come to mind, and there are so many more! Each of us prioritizes different benefits with homeownership.

Even though I think it’s great to be a homeowner, it can be the wrong choice in certain situations. If you feel like you’re ready to buy a home, or it’s something that’s on your radar, think about these three questions to see if you really are ready to buy a home.

1. Do You Have a Downpayment?

Here in Canada, you need at least a 5% downpayment in order to purchase a home to live at, and 20% to buy a home while avoiding the CMHC fees.

Saving enough for a downpayment is no easy task, so that’s why I think it’s significant and is a positive sign that you’re ready to buy a home. Amassing a downpayment shows good income, strong budgeting and financial habits, and the ability to avoid temptation when it comes to spending your money.

The ability to save is important. Once you save up a downpayment, saving for homeownership doesn’t just stop. You’ll need an emergency fund, costs for regular repairs and maintenance, plus you might have big renovations or projects you’ll want to take on. And if you ever decide to buy another home, you’ll need some savings. Learning how to save successfully is an important skill that will only benefit you moving forward.

2. Are You Able to Afford the Monthly Bills?

Homeownership comes with mortgage payments, but it also includes regular bills such as home insurance, property taxes, utilities (heating, electricity, water, and waste), condo fees (if applicable), and home comforts (internet, TV, etc.). It can be a big shock, especially if you’ve only lived with your parents, or somewhere you haven’t had big financial obligations.

The thing I always recommend is to use a mortgage calculator (like this one here) to get a better idea of what mortgage payments would look like. Depending on where you live and what you’re used to spending, you might pay anywhere above $500/month in additional bills to support your home and lifestyle.

Comparing your current expenses to your potential expenses can help bring things into reality, and give you a good sense of where you are. If you’re not used to having a ton of bills, maybe it’s not a good idea to max out your mortgage budget. You may even find that owning a home is cheaper than your current situation.

3. Do You Have the Situation to Enjoy Being a Homeowner?

The longer you live in a home, the more it makes sense to be a homeowner. People who buy and sell property frequently will have a lot of fees associated with the process that will negate most financial benefits of being a homeowner.

Before buying a home, it makes sense to look at things like your current situation. Can you see yourself moving in the next five years, do you have a career or job you love, or does buying a home match your lifestyle?

If you move around a lot for work, are in between jobs and willing to move for the right job, or don’t really imagine yourself living where you currently are for the long-term, it may not be the best time to buy. Renting is okay, especially if you’re able to save money to eventually buy a place. I think you only make a wrong decision when you rush into something without really understanding it, so take the time and make sure it’s the right decision.

Often big things can feel like they need to happen all at once, and it can become overwhelmingly exciting and overwhelmingly stressful. But buying a home is often the biggest transaction a person will make in their life. Taking the time to ensure things are right and make sense are worth it — it’s not a decision that should be made all at once or without a lot of thought and consideration.

About the Author

Derek Condon, CFP®

Derek Condon is a Certified Financial Planner and Mortgage Advisor specializing in financial planning, investments, wealth-preserving insurance, mortgages, and others. I help my clients with a variety of goals. From someone who is just starting their investing journey to a retiree managing their wealth. From a first-time home buyer to someone refinancing to get their very best mortgage. And, of course, everywhere in between.