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If you’re like most Canadians, the question of home ownership is when, not if. The positives of home ownership are deeply ingrained in our minds: the barbecues, the driveway ball hockey, the preferential tax treatment, the security. Likely, you’ll buy a house as soon as you can afford it.
When might that be? Check for yourself using this Canada Mortgage and Housing Corporation calculator, or go see a mortgage broker. He or she will use time-honoured ratios to determine how much money you can borrow to put towards a house. Then you’ll have a budget. Off to the races!
Not so fast: Economic conditions outside of your own mean that there are still times when it’s better to rent than to buy. Here’s a New York Times calculator to help with those determinations.
Another key point: Once you’ve got a whack of cash saved up, a house is unlikely to be the wisest investment. “A house is essentially a fridge,” says Moshe Milevsky, a finance professor at York University and author of Your Money Milestones. In other words: You use your fridge, devaluing it in the process, so you don’t expect to get a better price when you sell it years later. “In Arizona, they think of houses as fridges,” he continues. “In Canada, we’re not quite there yet.”
As such, Milevsky says guys should wait till they’ve got a hearty nest egg before taking a plunge: He recommends waiting till you’re in your 40s. Young people “value flexibility” he says. “Buying a house when you’re young can tie you down, and it changes your way of thinking.”
But as Milevsky’s comment indicates, no academic or financial planner (or financial columnist) can tell you when to buy. It’s not merely a financial commitment, but also a lifestyle choice which ranks somewhere not far behind getting married and having children as one of the biggest game-changing moments in your life. No pressure!
Image courtesy of Carnotzet.
I would not listen to Mr. Milevsky’s advice on buying a home.
Mr. Milevsky purchased his first home when he was still in school, in his 20s.
Then, he bought a condo.
A few years later, he bought a house.
He knew that renting was for suckers.
And, that comparison of a house to a refrigerator is ridiculous. A well kept house lasts for hundreds of years.
It is not so much the house that people pay for, if they live in the big city. It is more for the land.
The closer you go to the city, the more expensive.
This article misses the point by a mile!
While i agree that buying a house is not for everybody, nor are a multitude of other smart financial moves that should be. Real estate is a part of every financially successful portfolio.
As somebody who bought his first house before he was twenty, i look at it as my smartest financial and hardly a kin to marriage or having children, which are both substantially harder to sell.