Buying a home is the largest financial transaction you’ll likely ever make. To make sure you don’t get in over your head, you need to know your finances. Below are a few tips to keep in mind when making your next purchase.
Know your finances
Talk to your bank and find out exactly how much mortgage they will allow you to have. This lets you know the maximum price range you should be looking at, based on the mortgage amount plus how much you have for a down payment. But don’t feel like you have to spend the full amount of the mortgage “because you can”, because you may find the perfect home for less.
Other monthly expenses.
Insurance, utilities, strata fees and property taxes can all add up to a substantial amount each month. Add on possible renovation expenses or repairs that might need to be made to your new home and you’ll have a better idea of what exactly you’ll be paying out every month.
Calculate general expenses.
The bank doesn’t look at what you spend on groceries, car expenses, cell phone bills, clothing, child care, entertainment and so on, when they determine how much to pre-approve you for. Setting a budget and knowing these numbers beforehand will assist in the decision making process. Do a quick spreadsheet that lays it out all out – it’s much easier to know where you can cut back or what you can save on, if necessary, when it’s all there in black and white.
Only you and your family know what your true expenses are each month and what you realistically can afford. If you don’t want to give up your vacations, or your clothing budget or whatever hobby you may have, then it could make a bit more sense to spend a little less on the purchase of a new home.
- A $400,000 mortgage, at 2.75% for 5 years gives you a ballpark monthly mortgage payment of approximately $1840.
- A $350,000 mortgage, at 2.75% for 5 years gives you a ballpark monthly mortgage payment of approximately $1615.
Each person and situation is different so talk to your bank, do a budget and make sure you’re comfortable with the amount of money you’ll be paying out each month for your mortgage payment. You want to be able to enjoy life without worrying about the next mortgage payment, so be honest with yourself about what you can really afford.