How to tell if you’re financially ready to buy a home
The first step to determining if now is the right time to buy a home is to evaluate whether or not you are financially ready. Before you start looking for your dream home, you need to start by understanding how much you can afford. There are a lot of things to consider like mortgage payments, moving costs and maintenance expenses that can all add up.
How much are you currently spending?
Make a monthly budget to calculate what your current spend is. Consider all of the following areas:
- Household expenses: utilities, groceries, insurance, etc.
- Family expenses: childcare, recreation/wellness, clothing, etc.
- Entertainment expenses: dining out, subscriptions, travel, etc.
- Loans and debts: credit cards, car loans, student loans, etc.
- Savings and donations: RRSP, charitable donations, etc.
Add up how much income you bring in month-to-month (and that of your partner’s, if applicable) and then subtract your total monthly expenses from your income. This will give you the net amount you have to work with, to start off.
How much can you afford?
There are two simple calculations will show you what you can afford to pay for a home. This will also help you understand if you can afford a mortgage as well.
Photo credit: CMHC
Calculate additional homebuying costs
In addition to how much you can afford for a mortgage, you’ll need to consider the closing costs and any associated costs with moving. Here are some questions to think about:
- How much will you be putting for a down payment?
- How much will an appraisal or home inspection cost?
- How much will insurance cost (mortgage, home)?
- How much are property taxes estimated to be?
- Are there condo fees for the property? How much will they be, if so?
- How much will the legal fees be to close the deal?
- Are there any repairs or renovations you will need to do immediately after moving in?
- Will you be hiring professional movers? If so, at what estimated cost?
If you want to explore what homeownership might look like for you and what you can afford in your price range, please contact us about visiting a sales centre.