Three Major Things To Consider When Buying a Home
It is well understood that buying a home is one of (or the) most significant financial investments a person will make in their life. While exciting in the short term, it is critical to make sure you consider the long term and what will be good for you (and family) down the road. Such big decisions deserve every effort toward avoiding buyer's remorse, so understanding potential major missteps is a smart approach. Here are a few things you may want to watch out for when diving into the real estate market for the first time or when purchasing additional properties for enjoyment or investment.
Buying Too Much Home
Often is the case that homebuyers get so excited about a particular home that reason begins to deteriorate due to a “ I need to have it” emotion response. However, putting all your money into a single huge investment can be difficult to sustain over time and may interfere with other interests you or your family may have or develop over time. Instead of having to tighten the budget and buckle-down on expenses, make sure ensure your monthly budget (after home purchase) leaves room in the event of other wants, needs and unexpected expenses or financial setbacks. This will ensure that your home remains an asset to enjoy vs becoming a burden with month payments as the cruel reminder.
Not Saving Up Enough
The desire to jump into the market as soon as possible and get into a home is strong for many Canadians. However, in many cases, it can be worth the wait to delay the plan to purchase and save up so that you have at least 20% down payment. Putting 20% down on a house allows a buyer to avoid having to pay the added costs for mortgage insurance. The coverage offered by CMHC, Sagen and Canada Guarantee rang from under 1% to as high as 4.5% of the purchase price. While not a horrible option, having to add insurance will lead to larger monthly payments, but also less payment being directed toward the principal costs and more to interest. Having 20% down payment will reduce your monthly costs and also helps you to pay off your mortgage loan much more quickly.
Forgetting All The Associated Costs
It's easy to be focused on the cost of a monthly payment and down payment, after all they are important aspects of purchasing a property. It is important not to forget about all the other costs involved with owning a home. Costs which are up-front at time of purchase as well as long term costs. At time of purchase, addition costs include ( but may not limited to ) land transfer taxes, legal fees, moving expenses, appraisal, home inspection. Once you have moved in there the budget needs to consider and make room for property taxes, home insurance, maintenance fees, internet, water, electricity, natural gas and various other repairs and home upkeep costs. If your monthly mortgage payment is already pushing the limit of your budget, costs like these can push your overall cost of homeownership into the territory of being unmanageable.
There are many mistakes and missteps which can be made when it comes to purchasing a property, but by preparing and working with a team of professionals who make a living helping people avoid such errors and ensure their clients are aware of all of the costs of home ownership you'll be well on your way to owning a home that's both up-front affordable as well as sustainable.
If you are considering delving into the real estate market, please consider contact us to help assist and ensure your homeownership experience is a good as you deserve it to be.
Doug Paterson
Mortgage Agent in Ontario, Canada.
Dominion Lending Centres
416.432.8836 | www.dougpaterson.ca
