Home Sweet Home: How to Journey towards Responsible Home Ownership
Do your financial dreams include home ownership? Does owning your own bricks and mortar seem like a lofty ideal? Not necessarily! However, on the road to responsible home ownership, there is much legwork to be done during the journey to get there.
Owning vs. Renting
For most everyone, regardless of where you live, you are going to pay out costs for shelter- whether they be towards the landlord or towards the mortgage. There has long been a debate over the value of renting vs. buying a home. While there are undoubtedly arguments to support both sides of the debate, there is great financial merit to boosting up the asset side of your balance sheet with the equity that responsible home ownership provides.
However, taking on a mortgage and the costs associated with home ownership is not something to be taken lightly, and a little financial planning in preparation can help set you up for financial success.
Understand Your Responsibilities
Owning a home is more than having space to call your very own. For most people, home ownership represents both the largest asset and largest debt that they will ever have.
Before embarking on a journey towards home ownership, get all of your financial ducks in a row by educating yourself on your financial responsibilities associated with your potential mortgage debt. This involves reading and researching neighbourhoods, housing types (there are several from condo, to townhouse, to single family) and information around taking out a mortgage. It is also advisable to start looking at financial institutions- not just for the sake of a mortgage rate, but to make sure that you have got all of your bases covered from the get go.
Time is on Your Side
It is advisable to start the journey to home ownership well before your intended move-in date for a number of reasons. It takes time to accumulate not only a down payment, but to make sure that things like credit history, savings history and employment longevity are up to application standards.
Not only does checking the boxes off on these items help you qualify for a mortgage, it can help you secure a more favourable rate.
Stress Test Your Budget
It is a good idea to engage in different scenarios to see how durable your budget is. Just because your bank pre-approves you for a certain amount, do not assume that that is the price point in which you should be house hunting. Always leave cushioning so that you don’t become house poor.
Remember the variables: what if your income was lost or interrupted? What would happen if interest rates go up? What is the history associated with property values in the areas you are looking (if they have spiked up, they may be more vulnerable to a correction). How would you handle unexpected essential repairs for things like the roof or the furnace?
The best way to avoid a financial housing catastrophe is to anticipate one, and to account for it in your budget.
Lay out the Costs. All of the Costs.
There is much more to moving day calling in favours for extra pairs of hands and for your best friend’s pick up truck.
There are a number of costs associated with home ownership that may not be completely visible to the first time homeowner.
In addition to a down payment, there are closing costs, (which vary and can include things like lawyer’s fees, land transfer tax (depending on where you live), property taxes, insurance, home inspection, registration and/or title costs and the list goes on). Don’t forget about moving costs as well- which in addition to the actual act of moving can involve things like cleaners, food, boxes or containers and child care.