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Mortgage Freedom

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My landlord's email twisted my stomach into knots.

She informed me that she plans to sell the bright, spacious, perfectly located condo that I'd been renting for the past year and a half.

I would have to leave in three months, she said.

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Once the initial shock wore off, I asked myself: "Is it time for me to finally grow up and buy place of my own?"

Farhaneh Haque, director of mortgage advice at TD Canada Trust, said the first factor to consider is whether or not you can actually afford to buy.

"Really have a good understanding of where you stand financially today," she said.

That means finding out whether there's enough money for a down payment – a minimum of 5 per cent of the home's purchase price. It's also important to look at what other debts you owe and how stable your employment is.

And the down payment is just one cost to consider. Haque recommends potential home buyers set aside another 1.5 to three per cent of the purchase price to take care of closing costs.

Once the papers have been signed and the property is yours, it's not just the mortgage payments that you have to worry about after that.

Can you afford property taxes, condo fees, heat, electricity and repairs?

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"When you own a home, you can't call the landlord. Guess what? You're the landlord," said Haque. "You have to create a cushion in your monthly budget to provide for these additional costs."

Shannen Lazorko, a home financing adviser at Scotiabank, said those costs should be put into the context of the benefits of owning a property.

"At the end of the day, if you continue renting, you're building someone else's future," she said.

Sometimes it does make sense to rent if you're moving around frequently for work or if the money simply isn't there.

"I would say, yes definitely it would make sense to rent, but always with the plan to build toward home ownership," Lazorko said.

"Long term renting to me does not make any sense if you can build towards owning something."

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Steve van der Woerd has a different perspective. He ditched home ownership in favour of renting two years ago – more for lifestyle reasons than financial.

For five years, he owned a condo in Burnaby, B.C., a suburb of Vancouver.

"There, I was able to get 1,200 square feet, a nice big deck – something I just couldn't have found in the city of Vancouver for that price."

But van der Woerd found he didn't like feeling so disconnected from the cultural and social life in the city. He didn't like the car-centric way of life and the chores associated with keeping up the condo.

Now, van der Woerd rents in the Vancouver's South Granville neighbourhood, not far from downtown. He spends less time in his car and has considerably less stress.

"If you're in Vancouver and you're thinking of buying, inevitably you're going to move into a less desirable area unless you've got lots of money. My advice would be don't do that to yourself."

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As for me, I have enough saved for a down payment and the bank pre-approved me for a mortgage at a great interest rate.

But in the end, I decided to keep renting a little longer and build up more of a financial cushion.

When the adviser at my bank plugged the mortgage payments and the extra costs into a calculator, it added up to half my monthly income. That would mean less money for travel, lift tickets and nights out with friends – not to mention emergencies.

"That's what's called being house poor," the adviser said with a laugh.

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