It’s a question that’s top of mind for many young professionals.
Soaring real estate prices in some cities have dominated headlines and made the prospects of home ownership seem grim.
But don’t rule yourself out yet. Depending on your career and family, now may still be the right time to buy. There’s plenty to consider — and getting expert advice is the best way to make a sound decision.
“Purchasing a home is one of the most substantial financial transactions you’re going to make,” says Marc Kulak, VP, Real Estate Secured Lending at TD. And a real estate professional is your “best source of information about the market,” he says.
Before consulting with an expert, there are a couple questions you can ask yourself. First, where would you be content living for a while? Do you prefer an urban lifestyle or would you be happy in a quieter suburb? How important is location to you? Remember, buying a house is a long-term decision, and moving can be costly and complicated.
“Don’t base your decision on emotion,” Kulak says. “While location is important, it shouldn’t be the driving force behind your purchase.” Flexibility is important. In larger urban markets, consider listings in communities with a similar look and feel to your preferred spot, but that aren’t yet feeling the same pressures of the market.
Next, ask yourself: Are you financially ready to purchase a house? “It’s important to be mindful of your budget and related expenses and not to over extend yourself,” Kulak says.
Kulak says you should generally expect to allocate as much as three per cent of the cost of your house to extra expenses. As much as two per cent of that might go towards utilities — and that doesn’t include your regular mortgage payments. The TD Mortgage Affordability Calculator can help you crunch your expenses and figure out how much you can afford towards your mortgage.
A third indicator of your readiness is your down payment. The bigger your down payment, the less money you’ll need to borrow. And borrowing less means you’ll be less impacted by the effects of rising interest rates.
Once you’ve assessed your financial readiness, you’ll want to get pre-approved to see how much house you can buy. Your best option is a mortgage professional who can answer all your home ownership questions. A TD Mobile Mortgage Specialist can help make sure that you account for all your costs.
For instance, a rule of thumb is to a set aside 1.5 per cent of the house’s purchase price. That covers moving expenses, homeowner’s insurance and property tax adjustments. You should also make your purchase offer conditional on mortgage approval financing and a home inspection.
TD Insurance also ensures you have home insurance coverage that fits your needs. It offers the Right Fit Coverage assessment, a set of five to 10 questions that determines that best coverage for you. You can use it online or by phone, or call an advisor instead.
With all that said, buying a house can feel like peering into a crystal ball. Is now the right time to get the best bang for your buck? A mortgage professional can help demystify your real estate questions, but ultimately it’s up to you to decide whether the current market situation supports what you’re looking for. “It’s difficult to time the market with any investment, and real estate is no exception,” Kulak says.
The market can have less of an impact if your main goal is to have a comfortable place to live and you have no immediate plans to move, he says. That’s because the market value of the house won’t impact your return on investment in terms of whether or not it provides a place to live.
In short, it’s best to tune out the market humdrum and assess your own finances with the help of a mortgage specialist. You might just end up a homeowner sooner than you imagined.