Ex­perts cite var­i­ous fac­tors that come into play when you’re de­cid­ing whether to buy or rent a home

Montreal Gazette - - New Homes & Condos - ME­GAN MARTIN

Pur­chas­ing a home is one of the largest in­vest­ments most peo­ple will ever make. And while it’s of­ten re­garded as one of life’s mile­stones, home­own­er­ship isn’t for ev­ery­one. In fact, while many first­time buy­ers are ea­ger to take the jump from rent­ing to buy­ing, it’s crit­i­cal to first ex­plore whether or not this de­ci­sion fits with a buyer’s per­sonal and fi­nan­cial goals now and in the long run.

Own­ing a prop­erty comes with sev­eral ad­van­tages in­clud­ing build­ing eq­uity each time you make a mort­gage pay­ment, gen­er­at­ing profit when the prop­erty gains value, and hav­ing the free­dom to make your own de­ci­sions about things like re­pairs and ren­o­va­tions, said Nacim Ha­mane, se­nior fi­nan­cial plan­ner with TD Wealth.

Yet, in to­day’s fi­nan­cial cli­mate many home­own­ers in Canada are over­lever­aged, demon­strat­ing why it’s im­por­tant for new­com­ers to the mar­ket to un­der­stand the full fi­nan­cial com­mit­ment of home­own­er­ship be­fore in­vest­ing.

“Buy­ers of­ten overex­tend them­selves and be­come what we call ‘house poor’,” said Tris­tan Pungartnik, di­rec­tor of op­er­a­tions at Sum­mit Prop­erty Man­age­ment.

Among the many fac­tors to con­sider when ex­plor­ing home­own­er­ship, the ques­tion of af­ford­abil­ity should be ad­dressed first.

Hav­ing a sta­ble in­come and a down pay­ment of at least 20 per cent are im­por­tant el­e­ments in mak­ing the case to buy a home.

“Job and life sta­bil­ity need to be eval­u­ated,” Pungartnik said. “Buy­ers need to en­sure that if they de­cide to pur­chase, they can also main­tain their de­sired lifestyle, which may in­clude things like util­ity and car pay­ments, fam­ily ex­penses, travel and leisure ac­tiv­i­ties, and main­tain­ing and grow­ing per­sonal sav­ings.”

Buy­ers also need to con­sider in­ter­est rates and their life sit­u­a­tion.

“While in­ter­est rates likely won’t in­crease dras­ti­cally in the short term, it’s im­por­tant to con­sider the im­pact ris­ing rates could have on your mort­gage pay­ments,” Ha­mane said.

“You should also take into ac­count any po­ten­tial changes to your fam­ily sit­u­a­tion: Are you plan­ning a fam­ily or do you have a child on the way? Is it pos­si­ble a par­ent or other fam­ily mem­ber may come live with you at some point?”

Con­sid­er­ing these ques­tions be­fore buy­ing is cru­cial, as un­cer­tainty about these is­sues is one of the lead­ing rea­sons why peo­ple rent in­stead of buy.

“Aside from these fac­tors it’s best to rent if you don’t have the min­i­mum down pay­ment to pur­chase

the prop­erty, you don’t qual­ify for a mort­gage loan, or you can’t af­ford the costs as­so­ci­ated with home­own­er­ship,” Ha­mane said. “Also, in cer­tain re­gions prop­erty prices are out of reach for many Cana­di­ans, so in hot­ter mar­kets it might make more fi­nan­cial sense to rent for now.”

That said, if you have the fi­nan­cial ca­pac­ity and you’re look­ing to set­tle down for the long term, pur­chas­ing a prop­erty is of­ten the right de­ci­sion, Pungartnik said.

“And due to our low mort­gage rates, many peo­ple are now able to pur­chase a home,” he added.

The mo­ti­va­tion to in­vest in prop­erty of­ten ex­tends beyond fi­nan­cial fac­tors.

“Emotions in­evitably play a role when talk­ing about some­thing as im­por­tant and per­sonal as our home,” Ha­mane said. “In the case of fam­ily homes, par­ents want to pro­vide their chil­dren with a pos­i­tive en­vi­ron­ment to grow up in, and look for a prop­erty that will pro­vide this.”

In de­ter­min­ing the right course of ac­tion for your given sit­u­a­tion, there are on­line tools avail­able for putting to­gether a bud­get and cal­cu­lat­ing mort­gage pay­ments.

But it’s of­ten in peo­ple’s best in­ter­est to con­sult an ex­pert about their per­sonal and fi­nan­cial sit­u­a­tions when mak­ing the de­ci­sion whether or not to pur­chase a home.

“A good fi­nan­cial plan­ner works with you to help de­fine what mat­ters most to you and your fam­ily re­gard­ing hous­ing,” Ha­mane said. “In­stead of fo­cus­ing ex­clu­sively on your monthly in­come and ex­penses, they will dig deeper to re­ally un­der­stand both your per­sonal and pro­fes­sional goals and how you can achieve them.

“Life changes con­stantly and your fi­nan­cial plan should change with it.”

In ad­di­tion to con­sult­ing with a fi­nan­cial plan­ner, a mort­gage spe­cial­ist can help you as­sess whether or not this is the right time for you to pur­chase prop­erty.

“When you pro­vide a spe­cial­ist with all of the rel­e­vant in­for­ma­tion — such as your ex­penses, lifestyle, salaries, debts and so on — they’ll be able to prop­erly guide you,” Pungartnik said.

“But don’t be afraid to get a sec­ond or third opin­ion, as of­ten rates can vary de­pend­ing on fi­nan­cial in­sti­tu­tion.”

Job and life sta­bil­ity need to be eval­u­ated. Buy­ers need to en­sure that if they de­cide to pur­chase, they can also main­tain their de­sired lifestyle ... TRIS­TAN PUNGARTNIK


This 2012 photo shows a sign ad­ver­tis­ing con­dos for rent in Laval.


For-sale signs are seen in front of a Mon­treal res­i­den­tial build­ing in this 2015 file photo.


A for-rent sign sits atop the ex­te­rior wind­ing stairs of a Mon­treal home.


Tris­tan Pungartnik, di­rec­tor of op­er­a­tions at Sum­mit Prop­erty Man­age­ment.


Nacim Ha­mane, se­nior fi­nan­cial plan­ner with TD Wealth.

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