01/17/2020
Is buying a house with debt a smart decision?
Of course, you should know whether you have the basics of what it takes to
pay for a home — a steady job, cash for a down payment, a good credit
score. While you want to at least have your debt load under control,
waiting to pay off all your loans before you sign on the dotted line could
delay your home purchase timeline by years.
So, is buying a house with debt a good decision? Here's a look at the
not-so-simple answer.
The pros and cons of debt and homeownership
Depending on your unique financial situation, buying a house with debt can
do you some serious financial good, or it can cause your wallet to take a
hit in the long run.
Pros
On the plus side, you might be able to:
Build equity: the sooner you purchase a home, the sooner you'll stop
paying rent and start building equity. If you take the time to pay off
your debt before purchasing a home, you could miss out on years of equity
building and hurt your total net worth.
Get into a hot market: home prices are increasing rapidly in competitive
real estate markets such as New Brunswick. If you live in one of these
areas, you might only have a short window to purchase a home before you're
priced out of the market.
Make a prudent purchase: if you have the opportunity to make a smart buy,
say if you spot a property at a great price , then purchasing a home now
could well be worth it, even if you have debt.
Cons
At the same time, this move could set you up to:
Be house poor: if you purchase a home while you're still in debt, your
minimum payments could leave you with little or no money left over to save
for retirement or other life necessities.
Receive a smaller loan: when you apply for mortgage pre-approval, your
lender will use your minimum debt payments in a formula called your
debt-to-income ratio. This compares your total debt to your gross income.
APPROVAL FOR A MORTGAGE IS THE FIRST STEP.
Mac Homes
Stephen Vaughan
1-506-871-5291
[email protected]
