By Krystal Yee
A year ago, I made the biggest financial decision of my life and bought a home. Although it hasn’t always been easy, I am still extremely happy with my purchase.
Here are a few lessons I’ve learned:
1. Buy for less than you can affordWhen I first started my home search, I knew that the bank would approve me for more than I was comfortable spending. I was pre-approved for close to $300,000, but decided to cap my mortgage at $250,000, because no matter how stable you might think your life is, things can change.
When faced with the choice between a one-bedroom townhouse, and a two-bedroom option. I ended up buying the one-bedroom option because it freed up more money to put towards other things.
2. Save for home improvement projectsIt can be so tempting to head to Home Depot or IKEA and go on a home improvement and decorating shopping spree. But if you haven’t set aside the money, it’s better to hold off until you can afford to pay for your purchases in cash. Once you’ve made a list of what changes you want to make to your home, and the approximate cost, make sure to save an extra 10 or 15 per cent because you’re bound to spend more than you think you will.
Before I purchased my home, I had saved approximately $4,500 for home improvement projects. I ended up blowing my budget by spending more than $5,000 for new floors, paint, decorations, and furniture. And there's much more I want to do. However, instead of dipping into savings, I plan to set aside extra money for the additional renovations.
3. Buying is for the long-termIf you don’t know where you will be in a couple of years, or if your financial situation might change drastically, home ownership might not be right for you. In today’s real estate market, you might need to stay put in your home for at least four or five years – maybe even more – just to break even. So for that reason, it is extremely important to evaluate where you think you will be in the next five years, as well as whether your home will still be functional for your lifestyle within that time frame.
When I bought my home, I had no idea that, eight months later, I would be presented with the opportunity to move overseas. I consider myself lucky that my mortgage payments are small enough that I was able to afford to take that opportunity to move to Germany for seven months.
4. Have all your finances in order
Before you even start looking at homes, you should be working to get your finances in order. This includes taking into consideration your work history (many lenders look at an average of the past two to three years of income), credit history, and cash savings. You might not think those late payments to your credit card company were a big deal, but the cleaner your overall financial history is, the better chance you will have at snagging the best interest rate possible on your mortgage.
I started thinking about becoming a homeowner six years before I closed on my townhouse. In that time, I eliminated all of my debt, saved for a down payment, created an emergency fund, and tucked money aside for closing costs, moving expenses, renovations, and furniture.
Doing my research and making sure I had enough money to cover every expense made my home buying experience a lot less stressful.
5. Be friendly with the neighbours
You might be annoyed with your neighbour’s loud sound system, or the fact that their cats are always on your porch, but it’s in your best interest to be friendly. You never know when you’ll need someone to pick up the mail when you’re out of town, watch your pet for a few days, or water your garden.
Krystal Yee lives in Vancouver and blogs at Give Me Back My Five Bucks.
No comments:
Post a Comment