In the past, most marriages were quickly followed with a first home purchase. But when wedding bells also signal the marriage of personal debts, buying a house may not be the best financial choice.
Ask yourself these three questions to help decide if it’s time to buy a house.
How long will I be living here?
Don’t know? Don’t buy.
If you’re not settling down, then you shouldn’t be buying a house. Buying means a commitment to live and work in a set area as well as earning a minimum amount of money each month.
Remember that a home is a very long-term purchase. Consider, for example, how large your family could be in the future, beyond simply how many will be living in the house when you first buy.
You need to be satisfied with your job and aware that you’ll be giving up a degree of flexibility in lifestyle, travel and work.
Can I afford it?
When you’re already carrying debt, this is not a question to consider lightly. And the mortgage is only one part of the total cost of home ownership.
Property taxes, insurance, utilities and maintenance fees will add up, and quickly. And for serious problems, renovations can cost between $30,000 and $100,000, potentially representing many extra years of debt.
While you can rent out some of the property to help make ends meet, being a landlord means making the property compliant with tenant codes, performing regular maintenance and quickly responding to emergencies. Plus, tenants won’t always pay on time or in full.
What does a home really mean?
This is the most important question.
Having $200,000 in home equity is not the same as having $200,000, which is never clearer than when a debt collector calls. Unless you have your assets in one of the all-in-one accounts offered by some banks, you won’t be able to access home equity during emergencies.
Even with such an account, avoid thinking of your house as simply an asset to counterbalance debt. It’s shelter; a lifestyle choice that can provide a source of fulfillment—provided you can afford it and are prepared for all the costs.
Caroline Hanna, CIM, is an investment advisor with National Bank Financial Wealth Management.