You have a steady income and you’ve saved some money. What’s the next step to take in securing your financial future? If you said home ownership, that’s a great idea.
But buying a house can be tricky in today’s economy. Learning about mortgages, down payments, and buyer incentive programs are just some of the hurdles you’ll need to overcome. Before you can even look for open houses, you should have a clear understanding of your finances.
It’s likely you’ve already stumbled on some online tools to help you determine mortgage payments, rates, and more. These tools can give you some insight but it’s impossible for them to calculate every detail of your financial story.
A professional accountant can help you take an honest look at your finances and provide advice on the next steps to take so you can make the dream of homeownership a reality. Here are some of the basics you should know as you begin your journey to homeownership:
Understand the different payment options
Lots of different mortgage options exist, and it’s important to pick the right one for you. Once your accountant becomes more aware of your financial situation and spending trends, they can help you identify your tolerance for risk and your long term investment goals.
Different mortgage options include things like variable rate versus fixed rate mortgages, mortgage term lengths, and open versus closed mortgages. Without a solid understanding of your finances, it’s hard to determine which of these options will make the most sense for your budget.
Aim for a high down payment
Having a high down payment means lower monthly mortgage payments and better rates. It can be hard to save for a down payment, especially when you’re buying a house for the first time. But a higher down payment is one way to lower your monthly mortgage payments, which can help you weather financial changes, invest for the future, and have more money available for discretionary spending (or unexpected expenses).
A higher down payment can also give you access to a better rate. The more money you’re able to offer as a downpayment, the better your chances of avoiding default insurance costs, which can make buying your home more expensive.
Your accountant can help you find places in your budget where you can trim some expenses, reduce your tax burden, or save more money as you look for a home.
Know how much you can afford
You don’t want to be stuck with mortgage payments or property taxes you can’t afford. Remember that you can always find a larger home later, but being saddled with unreasonable monthly payments can affect your finances for life. You won’t be able to save as much for things like starting a family or retirement planning. Or you could even default on loans, resulting in a bad credit score and maybe even repossession.
At the same time, you don’t want to be overly pragmatic and realize your home isn’t built to grow with you. This means you’d have to sell prematurely and go through the expensive home buying process all over again. Your accountant can help you decide what mortgage you can realistically afford with the greatest potential for longevity.
Don’t forget additional expenses
There are many additional expenses when you buy a home, so it’s important to budget for them. These include things like moving costs, land transfer fees, and professional legal costs. There will also likely be brokerage commissions and home inspection fees. These can get expensive quickly. The good news is that your accountant might be able to help you find tax breaks and incentives like the Home Buyers’ Plan that will put some money back in your pocket.
Owning a home is important, and lots of young Canadians have it as their goal. Knowing what you can afford and getting your finances in order is a crucial first step to take before plunging into ownership. You want to avoid going into open houses armed only with numbers generated by an online calculator. Instead, be prepared with concrete numbers and a comprehensive financial plan in order to have a chance at owning a home you’ll love in today’s competitive market.
Ready to buy a home?
A reliable and experienced accountant will be able to help you determine what kind of home you can afford. At MMT Chartered Professional Accountants, we have the experience you need to help you achieve the goal of buying your dream home without any unnecessary stress. Come find out what you need to know – with a dream this lofty and worthwhile, there are no dumb questions. We’re ready to answer them all.
