You’re sitting in your rental apartment, scrolling through Facebook, and a post catches your eye.
Sweet! Time to pop open realtor.ca… but before you can even switch apps on your phone, another article in your feed pops up like this one: “House prices post record rise in May as Toronto chill yet ‘to be seen’.”
So… is now a good time to buy or not?!
Luckily, there’s only one person who knows if now is a good time to buy a house for you, and spoiler alert: it’s not the media or the housing market. It’s you.
Before you think about buying, you’ve got to figure out two key things: does a house fit your lifestyle, and does it fit your budget.
I know, you’d think a personal finance blogger would lead with budgeting, but it’s a massive life choice no matter how much you spend—and it’s not a great fit for some people!
First, let’s talk lifestyle
If you’re obsessed with your neighbourhood—the cafes, the transit options, that trendy brewery down the street—there’s a good chance that you’ll be looking at a hefty price tag to own the same kind of place you’re renting now. If buying means moving far away from your fave neighbourhood, plus buying a car and upping your commute time? Think long and hard about what your life is actually going to look like in that new home.
Plus, as a renter, brunch might be your biggest weekend commitment, but owning a place comes with its own set of “fun weekend activities” that can also be quite costly. You’ll have upkeep and DIY projects and renos—so you’ll want to make sure you’re OK with being a bit more Joanna Gaines, a bit less Carrie Bradshaw seasons 1-3 (although it’s not like she did much more upkeep after becoming a homeowner, so add that to the list of unrealistic Sex and the City money things).
Now let’s get real about your budget
If you’re still, “Bring on my quartz countertops and Pinterest projects!” it’s time to talk money. Buying a house is probably the biggest purchase you’ll ever make, so you need to make sure you’re going into it prepared.
Luckily, the key numbers here are pretty simple: 3 and 30.
Think 3 for the max you should pay for a house
A quick way to set a reasonable house budget is to multiply your annual salary by three. That number is your ballpark price for MLS-creeping—and yes, if you’re buying as a duo, you can include both salaries if you think you’ll both be working long-term.
Think 30 to set your monthly housing budget (including utilities and property taxes)
If that seems a little bit too easy—or you want to check if you can fit a slightly higher-priced place into your budget (hey, it happens)—then you can get into the nitty-gritty. Specifically, you’ll want to figure out how much 30 percent of your monthly after-tax income is, because *that’s* how much you can easily afford to spend on housing every month.
Pro tip: that figure needs to cover more than just your mortgage payment; you’ll also need to take your utilities and property taxes into account, among other expenses. Make sure to get estimates of how much each of those line items will cost to ensure that they all fit within the 30 percent equation.
What if that means housing is totally unaffordable?
If you’ve done the math and it doesn’t add up to home ownership, step back and take a deep breath.
You can still be a financially successful human even if you never own property. Instead, focus on saving 10 percent of your income for retirement and building up an emergency fund.
Still want to save for a house on top of that? Go for gold! You never know what the future holds, and what feels like a teeny down payment now might make your housing dreams come true some day.
Just don’t sacrifice absolutely everything you love at the altar of owning a home. I promise you it’s not a sustainable 25-year plan, which is about how long you’ll be paying your mortgage.
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