Buying a home comes with many decisions. Should choose a fixed or variable rate mortgage? A condo or detached house? Urban or suburban? Another tough choice faced by home-buyers is whether to buy a new or resale (used) home. For many of us it’s a personal decision shaped by our upbringing. If you grew up on a resale home, chances are you’ll prefer a resale home (unless it had a lot of issues, then you might actually prefer a new home). Let’s look at some of the factors to consider when deciding between new and resale.
- Freedom of choice: The best part of a new home is that you can choose everything right down to the kitchen sink (provided you have the money). You won’t have to worry about doing any of the upgrades yourself, which is nice.
- Save on home heating: Utilities are a major expense for homeowners. New homes tend to be better insulated than old homes, which means long-term savings on your heating bill.
- Less work: You won’t usually need to lift a finger with a new home for renovations since everything is already done. Since everything is brand-new, you’ll spend less on maintenance and repairs in the first few years.
- Updated style: Your home usually comes with the latest in home design and state of the art appliances. You can expect an open kitchen and plenty of space of entertaining.
- Builder warranty: Your home is built using the latest building codes and standards. If you come across any issues, you’re more than likely protected by your builder’s warranty.
- Higher down payment: With a resale home you can put as little as five percent down, but with a new home you’re often expected to put at least 20 percent down. This may be too expensive for many first-time homebuyers in expensive markets like Toronto.
- Delays: Make sure you write your move-in date on your calendar in pencil because it’s not uncommon for it to be pushed back due to unforeseen delays.
- An unfinished product: When you’re buying a new home, you’re buying an unfinished product in many cases. You won’t know what the home looks like until it’s actually completed.
- Cookie cutter designs: New homes don’t come in as many different designs as homes in older neighbourhoods.
- Extra costs: Although you’ll save on maintenance and repairs, new homes often come with extra costs, such as driveway paving and planting trees. Ask your builder to see what you’ll have to pay out of pocket.
- Unfinished neighborhood: You might have to drive a country mile for anything fun to do like going to the mall or seeing a movie.
- Unique designs: It’s hard to beat the unique design of a century home. They just don’t make homes like this anymore with stained glass or oak bannisters.
- Established neighborhood: Choose from different homes types (bungalow, semi-detached, two-story, etc.) in established neighbourhoods usually with plenty of amenities to enjoy.
- The basics: The basics like fencing and landscaping are often already taken care of for you.
- Room for negotiation: With a new home, the price is the list price. With a resale home, you may be able to haggle with the seller and lower the price.
- Higher maintenance and repair costs: Older homes tend to come with surprises – not always good. Since the home is older, make sure you budget more for maintenance and repairs. The furnace may be on its last legs or the roof may be leaking. That means extra money out of your pockets.
- Outdated design: Some people prefer the modern design of a new home. Some homes may be dated (even when they were built) and come with quirky designs and do-it-yourself renovations that leave you scratching your head.
- Less energy efficient: Resale homes tend to be less energy efficient, which means budgeting more toward your home heating and cooling bill.
Your decision to go for either a resale or brand new home will likely be influenced by a combination of your preference, affordability, location etc. It is always important to have all the facts objectively laid out before you and how it affects your specific financial situation so that you can make the best decision. We are often influenced by our own biases so it is important to seek qualified advice as to which route to go best suits you. As financial planners, mortgage specialists and real estate investors we have the unique ability to be able to analyze your situation and give you your best options. Contact our office today.