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The financials of buying a home

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Conventional wisdom would say that the question to buy a house is an easy decision. It’s typically a great investment with a high return potential. But some people often wonder if it’s the best decision for them. Here’s a few financial tips to help you decide if buying a house in Saskatoon is right for you.

Cost. Experts recommend spending no more than 32% of household income to be spent on housing costs. Factor in your monthly mortgage payment, your utility costs, and your property taxes and divide by your pre tax income to find out what your affordability is.

Down payment. Do you have a down payment saved? The minimum down payment is 5% of the purchase price but if you have 10-20%, that’s even better. The more you have saved, the less you’ll be charged in interest costs and with a 20% down payment, you won’t have the cost of mortgage loan insurance.

Closing costs. You’ll also need 1.5-2% saved on top of the down payment for closing costs. This includes things like lawyer fees, tax adjustments, insurance costs, moving costs, and any inspection fees.

House broke. I hear of many people, especially first time buyers getting in over their heads financially because they didn’t do their research. Generally as a safe rule, your monthly fixed costs should be between 50-60% of your after tax income. This includes things like transportation, housing, groceries. If more than 60% is allotted for your fixed costs, the amount you have leftover for spending money will be impacted and refers to a situation called being ‘house broke’. You don’t want to have to go into debt just to go month to month.

Renos. Experts recommend saving 1-2% of your income for housing maintenance. Your house may not need them right away but when they do, it will likely be costly.

It may seem like a large financial undertaking, and it is, but if you’re prepared and smart about it, it will be the best decision you ever make.

 

Kari Calder

Saskatoon real estate agent

Century 21 Fusion

Kari@saskatoonrealestate.net

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