If you are currently renting, and you want to know if you could really afford to buy a house, one thing you can do is “play house”. In other words, pretend you already bought one and see if you can manage financially.
All you need to do is set up a separate savings account and consider it your “house account”. Every time you get paid, put money into this house account just as if you were paying for a mortgage. Be sure to also take into account the additional costs of owning a home such as property taxes, utilities, etc.
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When you consider the costs of buying and selling a home, it’s a good idea to wait to buy a house until you are sure that you will live there for at least 3 years if not longer. The reason is that the cost to buy and sell a home can be quite high and you will be unlikely to recoup all of your expenses if you only live in your home for a short time.
Some of the expenses you will incur include:
Appraisal fees – Your lender may want you to get your home appraised in order to have an independent assessment of your home’s value. This can cost from $150 to more than $300.
Inspection fees – It’s always a good idea to have a qualified home inspector inspect the home before you commit to making the big purchase. A good inspector will help you to identify problems with plumbing, electrical, the roof, the foundation, and much more. This will help to ensure that you are buying a home that is in good shape. Inspectors vary in price. We paid about $350 for our home inspector when we bought our home. It was worthwhile because it bought us peace of mind.
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by Pam on February 17, 2010
Renting can sometimes be more appealing than owning a home. For the first two years of our marriage, my husband and I lived in a tiny apartment. All we had to pay for was the electricity; everything else was included in the rent. The only downer was that we felt like we were throwing away more than $7000 a year with nothing to show for it.
We decided to purchase a home in order to build equity as well as to have a place of our own with a small backyard. We soon discovered that our expenses shot way up due to water bills, heating bills, maintenance, insurance, and property taxes. Although our expenses increased, we at least had the sense of satisfaction in knowing that we were no longer “throwing away” our money to rent payments. We also had a lot more space to enjoy.
Although home ownership has been a positive experience for us so far, it doesn’t mean it’s the best option for everyone at every life stage. We definitely couldn’t have afforded to own a home when we were first married, so renting was a sensible option for us. There definitely is a time and a place for both renting and owning a home.
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by Pam on January 26, 2010
What Is The First Time Home Buyer’s Plan?
If you are planning on buying or building your first home and you want to use money from your Registered Retirement Savings Plan (RRSP) to use for your down payment and other house expenses, instead of making a regular withdrawal and facing the tax consequences, you can take advantage of the First Time Home Buyer’s Plan (HBP). When you take advantage of the HBP, what you are essentially doing is borrowing money from yourself that will eventually need to be paid back into your RRSP.
Who is eligible?
In order to be eligible, you must enter into a written agreement to buy or build a home. The home must be your principal place of residence, and you must be a Canadian resident. The most you can withdraw is $25,000, and you can either withdraw it all at once, or you can make a series of withdrawals throughout the same year. If you plan on buying a house with your spouse, your spouse can also take advantage of the HBP.
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by Guest on November 3, 2009
With the prices of homes in this present market, it leaves us contemplating whether or not we can even afford the down payment. Add to it the cost of taxes and home insurance and it can become a very stressful situation. If you are looking to own a house in the future, saving your money today with strategic planning can prepare you for the down payment in the timeline you choose. Before resorting to withdrawing money from your retirement savings or 401K, consider other options first.
The amount of your down payment will affect your savings plan. Before the housing crisis of 2008, lenders were granting mortgages without down payments. Today, very few if any banks will take that risk, even if your credit is superior. Calculate 20% of the home sale price to be safe and prepared. Don’t forget to include closing costs and miscellaneous expenses. You may be able to put down less money; however, any number below 20% of the sale price and you will need to purchase PMI (private mortgage insurance). This insurance protects the lender should you default on the loan. It is wise from a financial standpoint to put down the 20% and pass up the PMI. PMI adds unnecessary costs to your mortgage.
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by Pam on October 8, 2009
I watched part of Holmes Inspection on TV the other day and it was about this young woman’s experience in buying her first home. She bought a 20 year-old townhouse and had a home inspector give her the go-ahead to make the purchase. Within a week of taking possession of her new home, she noticed that something in her bathroom was causing water to leak through her kitchen ceiling. She hired a plumber to resolve the issue, but all the plumber did was make a large hole in her kitchen ceiling and then he told her he couldn’t find the leak so he wouldn’t be able to do anything. Nice!
So, when Holmes and his crew came to take a look at the situation, they were able to discover where the leak began. Unfortunately, the more work they did on the house, the more problems they discovered. The home had been recently renovated, so even a home inspector could not have possibly caught every problem since some of the issues were covered up. Nevertheless, the home inspector wasn’t thorough enough and should have seen some red flags that would have indicated possible issues with the home.
When purchasing a home, in order to save money and frustration in the long run, it’s good to make sure you find a credible home inspector. Also, be wary when purchasing an older home with recent renovations as the new laminate flooring or a fresh coat of paint could be covering up some nasty household problems.
Make sure to ask lots of questions about the house and find out as much as you can from the previous owners. Also, don’t be afraid to ask questions of the home inspector. Make sure they check the electrical and plumbing. The key is not to become emotionally attached to the house because if you do, you may end up buying a home against your better judgment.
Buying your first home can be really exciting. Do your due diligence and get a home inspection before committing to a home purchase. Make sure your home inspector is reputable and highly experienced. Buying a home is a huge investment; Make sure it’s a wise investment that you won’t regret.
When you move from an apartment into a house for the first time, you may be surprised by all of the extra costs associated with owning a home. Rent often includes some or all utilities but once you live in your own house you are stuck paying for everything! When my husband and I first moved from our apartment into our house, we discovered that our living expenses increased significantly. Water bills, natural gas bills, and property taxes weren’t even a part of our vocabulary. But that all changed when we bought our house.
If you are hoping to buy your first home, I would recommend that you first sit down and create a tentative budget for your living costs at your prospective new home. Find out how much the previous owners paid for their utilities so you can get a rough idea of how much to budget for.
Also, remember that you will have to pay closing costs, legal fees, and other bank fees in order to process your home purchase. Be sure to find out how much these will cost so you won’t be surprised at the last minute. It’s smart to spend less than you can “afford” on your house so you will have adequate funds to pay all of the fees, as well as to pay for the extra things you will need to buy that you never needed while you rented an apartment.
For example, much to the chagrin of our neighbors, we didn’t have a lawnmower or any garden tools or supplies when we first moved in, so our yard was a mess for a while until we had a chance to pick everything up. Fortunately a friend of ours wanted to get rid of his old lawnmower so we didn’t have to buy one, but purchasing household items can certainly add up.
Owning your own home is great, but make sure to plan ahead to ensure that you can truly afford to live in it once you’ve purchased it. Don’t feel like you have to furnish your entire house right away, either. Do it bit by bit as you can afford it. You will enjoy your new home more if you aren’t faced with financial pressure. Make wise decisions that you won’t live to regret.
