There are many reasons why a person might become a homeowner on their own. They might be single, want to be more independent, feel like having a back yard, or to save money.
According to Statistics Canada, more and more single adults are choosing to buy real estate. Between 2001 and 2016, their number increased from 429,000 to 482,000. Most opt for a condominium as it is usually more practical and less expensive; however, this type of property does not offer the same advantages as a single-family home, such as a big yard, a greater number of rooms and more privacy. But is this a reasonable purchase when there will only be your name on the dotted line? It all depends on your circumstances. Here are some things to consider.
Maintenance: Are You Ready?
Mowing the lawn, clearing the gutters, painting the shed, shovelling laneway are just some of the many chores that must be taken care of when you own a home. Some people may find it difficult not to have a second pair of hands around to complete these tasks. Is this the case for you? If your budget allows, it is possible to hire a professional to assist you.
Saving for the Down Payment Is Harder
Ideally, you should save at least 20% of the total cost of the home before you buy the house of your choice, which for a $250,000 home means a $50,000 down payment. If the amount comes up to less than 20%, you will have to pay an insurance premium to the Canadian Mortgage and Housing Corporation (CMHC). The cost will vary depending on the actual down payment. Obviously, in the case of two owners, it is much easier to save up that 20%! But it is not impossible if you adjust your budget and plan ahead.
You Have to Take Care of Bills Yourself
Of course, all household expenses will have to be paid out of a single salary: welcome tax, notary fees, municipal and school taxes, electricity, Internet, furniture, painting, etc. It is therefore recommended that you prepare a detailed budget to see if your real estate dream is realistic.
Which Is Better, a Fixed or a Variable Rate?
Your mortgage lender’s interest rate can significantly influence your monthly payment. First, shop around by contacting several financial institutions. Then, you will have to decide if you prefer a fixed rate (the interest rate does not change) or a variable rate (it varies based on the market: it is usually lower than the fixed rate, but can increase without warning). Our advice: if your income is very comfortably above your monthly fees, you can go for a variable rate without worry. If not, though, err on the side of caution and opt for a fixed rate.
A Long-Term or a Short-Term Loan?
Usually, the longer the term of the mortgage loan contract you sign, the lower the fixed rate will be. However, this does present one disadvantage: the longer the term is, the more likely it is that your circumstance will change over this period. For example, if you meet the love of your life and wish to move in with your spouse, you will have to pay a penalty to break the contract. Sometimes, it’s best to decide on a shorter term and renew as needed.
Insurance Is Important
In a context where you are the sole owner, insurance is essential. Since you can only count on yourself in the event of an expected setback, such as a job loss or work stoppage, it is better to have protection that covers bills and mortgage payments.
Are There Really that Many Houses Under $250,000 $?
A sole homeowner can often afford to buy a condo. But what about houses? Unless you have important financial resources, the pool of affordable single-family properties is more limited; however, prices vary greatly from place to place. According to a study conducted by JLR, in 2017, 90% of homes in five regions across Quebec cost less tan $250,000. These were Bas-Saint-Laurent, Mauricie, Côte-Nord, Nord-du-Québec and Gaspésie-Îles-de-la-Madeleine. In these regions, there are a number of single-family homes worth less than $200,000. Nevertheless, if you are thinking of moving to a city located near an urban centre like Montreal, an average budget will present some challenges, unless you acquire a property that needs some TLC.
Despite some drawbacks, becoming a homeowner is usually a happy event when one knows how to manage their money. Real estate is a sound investment and you will be the only one to reap the rewards when you resell. Not to mention the fun of having all that space you now own for yourself. Feel free to ask a RE/MAX broker or your banker for advice, they can help you evaluate all your options.