One of the most difficult things for people when it comes to their personal finances is planning and sticking to a budget. When you're buying your first home, it's likely the biggest purchase you have made in your life; knowing what you can realistically afford each month becomes even more important!
Here's a good starting point: if you're currently renting, look at your situation and say, "If I'm paying $1,100 in rent, is it realistic to start paying $2,000 for a mortgage?"
New Home = New Expenses
Owning a home means more monthly expenses than just your new (and possibly higher) mortgage payment. You'll also want to consider the ongoing costs of:
- Property taxes
- Homeowner insurance
- Maintenance and repair
- Utilities and municipal services
- Mortgage insurance
- Strata fees
While some of these items may have been rolled into your rent by your landlord, you will now be solely responsible for making the payments or having contingency funds on hand. Your homeowner's budget should include each of these expenses so that you can get a full picture of your new financial situation. If you're working with a realtor, they will be able to help you find recent costs for the property you're interested in so you can use accurate values in your budget.
There will also be some significant one-time expenses which could include the closing costs of your purchase, property transfer tax, and any appliances or furniture you will need for your new home.
Your Overall Debt Load
Once you've considered how much of a jump up you can afford from your rent, you now need to ask yourself, "How will this impact all the other debt I'm carrying?" If you have other debts that are going to be pushed back because you took on a mortgage, maybe the focus should be to look at those debts and decide if you can pay them off faster. As you can see from the above list, becoming a homeowner is costly, so you want to be in the best possible situation when you take on this responsibility. After all, you want to enjoy your home rather than stressing about making payments.
Whether you want to brush up on your budgeting skills or move on to the next step in buying your first home, our free first-time home buyer handbook is full of information and tips you can use today.
Auxilium Mortgage Corporation is based in Victoria, BC and works with clients locally and across Canada. The Auxilium team has over 100 years of combined financial experience and access to dozens of lenders to help you meet your goals. If you're ready to start your first home buying experience, contact us today for a free consultation with one of our mortgage specialists: call Toll-Free 1-855-590-6520 or visit us at 307 Goldstream Avenue during regular business hours. We can also arrange an appointment evenings or weekends to work with you.