The Mortgage Question


To buy or not to buy.  That really is the question.  Smarter minds than mine have argued about this, and probably will for ages to come.  We’re dealing with a number of repairs that surprised us this summer, so I’ve been thinking about this question a lot and wondering if we really should have kept renting all these years.

I’ve always had a number of standards that had to be met before I decided on a house.  I mean, I always assumed I’d buy a house, since that had been drummed into me from a very young age, but I still knew that I shouldn’t be stupid about it.  I wanted to make sure that a) the mortgage and condo fees didn’t add up to more than average rent, b) in addition to the down payment, I had to have 6 months of mortgage payments saved up in case of emergencies, c) I had flexible enough terms that I could add extra money as often as I wanted to, and d) the mortgage wasn’t going to be more than 3x my yearly income.  Since I live in an area with relatively cheap property values, I was able to find a small condo that met all these qualifications, if barely.


However, I wasn’t aware of all the hidden costs.  If someone takes a full 25 years to pay off a mortgage, they’re probably paying half again the amount of the mortgage in interest.  That’s at today’s low rates; if they go back up to historical averages, you could pay double the price of the house or more.  Then you have higher utility bills, yard maintenance costs, more furniture to buy, repairs, etc, etc, etc.  You can’t always count on property values rising enough to make up for all of this.  My first little condo hasn’t risen in value at all.  If we’d been living there this whole time and tried to sell it now, when you factor in all those costs we’d be losing a lot of money.

The ‘salary x 3’ rule was another guideline I followed.  If you’re making $50,000 a year, banks will probably lend you up to $250,000 (I just checked a couple online calculators to confirm this).  However, at that rate you’ll be spending an enormous percentage of your income on housing expenses, and it’s unlikely you’d ever be able to pay it off early.

Even with all of that, though, it’s a huge roll of the dice.  I live in constant fear that we’re going to come across a huge repair bill that insurance won’t cover.  Renting seems like easy money until you factor in the months between renters when you’re paying everything yourself, and think about the hours you spend finding new renters and getting everything ready.  If property taxes or any other costs go up, you’re boned: in Ontario, at least, you can only raise rent for current renters by a minimal amount every year.

Basically, you really need to look at all the factors and judge your priorities.  If you have a growing family and really need more space and a yard, maybe all the other risks are worth it for you.  If you don’t live in Toronto, Vancouver, or other cities with mind-boggling property values, it’s certainly easier to afford.  It’s just not the sure bet that I always thought it was.

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