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Are You Ready For A Home Of Your Own? (Part 2)

April 9, 2014

The “amazing race” of home buying and selling is on and the competition is fierce. Often open_house_linetypical of the spring market, buyers scramble to see listings in their price range while sellers do everything in their power to get top dollars for their investment.

In last week’s post, I discussed four questions to ask yourself before you join ranks with your fellow competitors. Below, are more things to consider before you become immersed in the annual buying frenzy.

1. Do your HOMEwork up front Know what you want, don’t want and can live without in your new home. It’s almost impossible to find the perfect house unless your budget is unlimited. How will a new home fit into your lifestyle both inside and outside of work? Will it change your daily commute? Will you need to buy a second car because your house is in the suburbs? Realize that a home will impact your life in many ways; some good and some not so good.

2. How much home can you really afford and still sleep well at night? The answer to this question can be different for everyone. A good downpayment (ideally 20%) is just a start. Don’t rely on your banker to tell you how much mortgage you can afford. He/she doesn’t know you or what’s important in your life. Recognize that interest rates today are historically low and likely to increase in the future. Therefore, don’t stretch yourself too thin.

Beyond the regular mortgage payments, do you know what it costs to take care of your home? Take some time to crunch the numbers or play with an on-line calculator- consider monthly utilities, taxes, expected maintenance, unanticipated maintenance, potential capital improvements and even furniture to fill your rooms. Don’t forget the one-time closing costs that you must pay for up front i.e. legal fees, moving costs etc. Read about and test the new calculator developed by Rob Carrick of the Globe and Mail; Your Real Life Ratio – a great tool to better predict your ability to afford a home.

3. Plan to live there for at least 5-7 years for it to be a good financial decision. A variety of studies indicate that more frequent moves are costly and can reduce/eliminate potential real estate price gains.

4. Paying for your home is a long term commitment. Many people consider their mortgage a type of “forced savings” that they may not otherwise be disciplined enough to have. While this can be true, we all must leave room for additional savings to support our retirement, kids educations etc. Tying up too much income in your house, especially as you approach retirement, is not a wise move. Also, consider accelerating your mortgage payments as your income increases. The faster you pay off your mortgage, the less it costs and the more financial flexibility you will enjoy for your future.

Best of luck with your home buying decision. If you do your homework well, it will be an exciting and memorable time of your life!

For more information, please visit some excellent home ownership resources and calculators on the website

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