Throwing Money Out The Window
I don’t think there is a right or wrong answer when it comes to renting and wasting money or purchasing a home but there certainly are pros and cons to both.
Why do I choose to pay rent?
While the freedom of owning my own home sounds great getting there on my own may not be a reality but I am certainly going to try.
I am saving my money right now and enjoying it, though what I am saving for exactly is not set in stone. For the next 10 years I am choosing to continue to pay rent.
As a single mother I want to make sure I am fully prepared for all the costs and fees that come with being a homeowner if I do decide to make that choice down the road.
I have my mindset that in 10 years, if I am still single, I could be close to or have enough money saved for a reasonable down payment on a house if desired.
While budgeting and saving money regularly and wherever I can I figure I could have a decent down payment saved through investments and other means in those 10 years.
Could you afford a mortgage on one income?
Buying a house as a single individual with one income it is not impossible as Mr. CBB showed us while sharing his experience with “Buying a house, was I too young?” Though not impossible it can certainly be a challenge when only one income is involved.
I like the idea of owning my home and having my own space where I get the make all of the decisions. If I want to paint a room then I will paint it, instead of having to get permission from a landlord to do so and how I would love to have my own property to landscape, oh the things I could do!! Is it worth it though?
Importance of a down-payment
Without a sizeable mortgage down-payment, 25% usually of the value of the house, you incur more insurance fees as your debt:income ratio is now bigger making you a higher risk borrower.
Where I currently live, in today’s housing market $350,000 or even $300,000 would buy more than enough space for the kids and myself and still be a relatively newer home.
Saving up 25% of the home purchase price would make my down-payment anywhere from $75,000 to $87,500. Can I save that much in 10 years?
I believe it is possible and I am trying everyday to find new ways to save, though it is a challenge I have accepted it with full determination to make it a success.
Again, I do not desire a large, luxurious home. I honestly do not want to clean it and would rather see my money go into savings and time spent with my kids then into more housework. I do not make a ton of money so being smart with what I do make is key.
I don’t want to be able to make my mortgage payments, stretch my dollars to pay taxes and maintenance costs while having nothing in my house or unable to put food on the table so a sizeable down payment is important.
Getting in over your head
Owning a house in our society comes with the status quo of being successful. If you can handle a mortgage then you must be doing something right!
The town I grew up in and still live in has boomed in the last 10-15 years with multi-million dollar homes that are absolutely beautiful but seem to be put on the market quite often as people are finding they really can’t afford them.
A large, lavish home or mansion is not something I ever desire, even if I were to ever win the lottery, I don’t want to clean it, especially as a single mom with enough already to do, but I would be happy with something that will meet our needs space wise, yet comfortable.
More space equals more cleaning time and more space for junk and clutter to build. If you have read some of my past blog posts you will know that these are two things I have been working to reduce the amount of time in my life that I devote to them.
Keeping up with the Jones’ is definitely not a smart choice when it comes to purchasing your home. A house is a major investment so why would you want to take on more than you can handle just to keep up with your friends and jeopardize losing it all?
A close friend of mine has made many comments about how their house is costing them more than they can really afford and how it is putting a strain on all other aspects of their life, this is not where I want to be, ever!
I guess when Mr.CBB says “It’s not about how much money you make it’s how you save it” really is important not only to spending on everyday items but big ticket items as well. If we keep buying on credit or spreading ourselves too thin financially it will put a strain on our lives and for me, it’s not worth it.
If I am going to own a home it will be within my means, but only if and when I am fully prepared. Our quality of life right now is not lacking anything because I do not own where we live.
Benefits of Renting
Many will argue that renting vs. buying your home, apartment or condo is like throwing away your money.
This argument stems from the fact that unlike owning a home where you build equity, there is no return paid on your monthly rent payment. While this is true a mortgage can also be a good way to throw some money away.
Typically, until the 5th year of a mortgage the majority of your monthly payment goes towards interest while hardly making a dent in the amount of principal paid down.
- If you sign an all-inclusive lease then your single monthly rent cheque pays for everything, utilities, property taxes etc..instead of several separate bills and fees when you own a house or a condo.
- A single, all-inclusive monthly payment is much easier to work into your budget than fees and bills that can vary from month to month.
- Renting does not require you to come up with thousands of dollars for a down payment, closing costs and fees for things such as building inspections, legal support, property taxes and insurance. Though you are not building equity from your home you are saving these costs which can become money you can put into savings, therefore still giving you return on your investments.
- When your lease is up you can move! Moving to Western Canada is something I dream of and hope to make a reality someday. Moving out when a lease is up requires a lot less time in paperwork and avoids penalties and fees you may incur while trying to sell a house.
Buying a home is a major investment and can be a great investment if you are prepared for it. Choosing to rent and save money while making informed choices of where to save that money whether it’s in stocks and bonds or even just a Tax Free Savings account can be a great investment as well.
My goal right now is saving to be able to afford a down payment though that might be not what I actually end up doing with it.
If I choose to continue renting after 10 years then I have an x amount of dollars in savings that I can continue to put to work building our savings and investment portfolio.
Heck who knows maybe one day I’ll meet the man of my dreams and not have to buy a house on my own but even then we will have an awesome start at paying down a mortgage, two incomes and less interest to pay sounds great to me.
In the meantime I am happy paying rent and planning for the years ahead. A stable future for the kids and I is what I look forward to, whether it means investing in a house, paying for the kids schooling or re-investing it into the market, it will be money well saved and put to good use no matter what.
Do you rent and would you consider buying a house right now?
Katrina is regular contributor for Canadian Budget Binder and is as passionate about personal finance as she is gardening. Katrina is a horticulture graduate with over 10 years experience with landscaping and greenhouse production.
Her goal is to share her knowledge and experiences blogging about gardening and her continued passion for personal finance in hopes of motivating others. While being a single mom of two and an in-store marketing representative for major retail shops she also runs her own Landscaping Services in Southwestern Ontario.
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- How To Maximize Your Mortgage (canadianbudgetbinder.com)
- Our Canadian Home-Tips For Saving For A Downpayment (canadianbudgetbinder.com)
- Budgeting With Mr.CBB Got Us Back On Track! (canadianbudgetbinder.com)
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