Home Ownership. How much is it going to cost? How much can you save?
Congratulations! You’re married to the love of your life and if you haven’t bought a house already, you are probably now thinking about how to purchase your first home. Saving for that first home purchase can be tough. Most young couples start out renting an apartment that they can comfortably budget with their income. The challenge is saving enough to have a down payment on a home. Very few young people are disciplined enough to resist the temptations that steal our hard earned dollars. Clothes, cars, cell phones, electronic devices, televisions, eating out, concerts, parties, etc, etc are robbing you of your potential savings and sadly causing you to live beyond your means locking you into debt.
The good news is that you are young and you have the power of time to accumulate wealth providing you start now to make smart choices.
What if I told you that you could easily save $12,000 or more towards your first home within just 2 years? Would you do it?
This may sound crazy, but if it’s possible, MOVE BACK IN WITH YOUR PARENTS!
Think about it. Hmmmmmm?
Let’s figure out how much you need to save. Take a look at Minto, Ontario (Harriston, Clifford, and Palmerston) on realtor.ca. You should be able to find a reasonable comfortable property for less than $250,000.
Let’s say you found a home that you have negotiated for a price of $246,000
CMHC Mortgage Insurance would charge you $9, 348.00 which can be paid in a lump sum but most buyers choose to add it to the mortgage. Our calculation will add it in to the mortgage.
$12,300 Min Down Payment (5% of purchase price subject to approval)
$748 PST on Mortgage Insurance
$2,185 Land Transfer Tax
$ 2,185- First Time Home Buyers Rebate
$ 1,000 Lawyers Fee (estimated)
$14,294 TOTAL CASH REQUIRED TO CLOSE
Amortized over 25 yrs using a 5yr fixed rate @ 4%, your monthly mortgage payments would be $1,278.
Terms and conditions may apply and your individual credit situation will play a factor in the rates and terms you would ultimately qualify for. Rates and Monthly Payment Amounts shown are examples only and do not take into consideration homeowners insurance or property taxes.
In the example above you will need to save just over $14,000 in cash!
Let’s assume that you and your new spouse are paying $1000 per month for rent. What if you could make an arrangement with your parents to move in with them and continue to pay $1000 per month instead to your parents and in return the parents agree to put half of it away for you to help you save for your house? After two years they will have put aside $12,000 for you! Of course this is not going to work for everyone, but if this is a possibility, it is a quick easy way to accumulate savings for your down payment!
If this doesn’t work for you…..now what??? Get Frugal! You need to tighten your budget, own up to your debt and figure out where to cut back to create savings. Make a plan and set your goals!
My favourite money budget guru is our own Canadian Gail Vaz Oxlade, host of the hit television show Til Debt Do Us Part. You can find her books on amazon.ca. I highly recommend that you get her copy of Debt-Free Forever. It is the best $15 that you will ever spend. I know you will thank me!
I have only just barely touched on the financing aspect of purchasing a home. Stay tuned and I will post in more detail how the bank determines pre-approval for a mortgage and what that means. In the meantime start thinking about how you spend your hard earned dollars and how you might be able to hang on to some of that cash for yourself!