If the experts are right about the BC housing market set to decline in 2012, it makes you wonder how good an investment buying a house really is?
Is your home a good investment? We were brought up to think it was your best investment which would grow with you.
If you live in Vancouver where average prices are topping $780,000, followed by Toronto at $456,147 and Calgary at $398,836, it makes you think twice about buying a home. (Clearfacts)
What’s Your Best ROI?
If work, family or lifestyle make BC the only place for you, then look at all the advantages and disadvantages of buying versus renting. Perhaps you’re better off investing your money in other vehicles for a better return on investment considering BCs higher cost of living and house prices.
Other reasons which favour renting over buying include:
- not a great credit rating
- uncertainty in your job
- possibility of job relocation within your company
- high debt ratio – factoring all the front-end costs of buying
- maintenance issues – if you’re not a jack- or jill-of-all-trades, it gets costly
Maintenance issues are a huge cost of home ownership. If you’re buying a home, experts tell us to set aside 5% of the purchase price to cover maintenance and repairs. If you’re not buying, renting is a sensible option.
Affordability Guidelines – Can You Afford To Buy A Home?
Courtesy of Clearfacts, these five points below will help decide whether renting or buying is better for your financial situation.
- Be sure that the monthly cost of carrying your mortgage, plus your monthly share of property taxes and heating, is lower than 40% of gross monthly household income.
- Determine how much your payments would be if interest rates rise in the next several years.
- Be sure to have a good start on retirement savings and ensure that you will be able to continue modest contributions in your early years as a homeowner.
- If you have kids, make sure that you will still be able to regularly contribute to a Registered Education Savings Plan (RESP).
- Make sure you have money left over to furnish your home, take family trips and cover emergency expenses without going into debt.
At the end of the day, the stress caused by money issues is not worth keeping up with the Joneses. Renting makes more sense than buying a house you can’t afford.