Savings, and monthly expenses play an important role in determining how large a mortgage you can afford. The differences between renting and owning a home are enormous, but the question of which is better for you is a highly personal one. The decision to buy a home is probably the biggest financial decision you will make in your lifetime.
In general, you should expect monthly mortgage payments and related costs to be somewhat higher than rental payments. Keep in mind that in addition to mortgage payments, you will have other ownership costs such as property taxes, repairs and maintenance, strata fees, insurance and utilities.
Your monthly income must allow you to maintain a comfortable standard of living after paying these costs. Will you still be able to afford expenses such as food, clothing, transportation or irregular expenses such as medical bills? What about vacations or other leisure expenses? If your new mortgage payment and other associated costs, plus payments on loans, lines of credit and other debt approaches 40% of your gross monthly income, you are probably not financially prepared to take on a mortgage.
Buying a home isn't just about money. There are many personal factors to weigh before making the decision that's right for you:
- Are you looking for a stronger sense of place within your community?
- Are you willing and able to maintain and repair your property and home?
- Do you want the stability of home ownership as the foundation for starting a family?
- If the answer to any of these questions is yes, then home ownership may be a natural next step.
On the other hand, renting is probably your best bet if you:
Prefer the freedom to move to a different neighborhood or even a different city
Are planning a leap into an entirely new field or career.