Prepare for the Costs of Homeownership
Purchasing a home provides many benefits. Homeowners gain stability, peace of mind, and a sense of pride from buying a home. They can also build wealth for their families.
For instance, you can invest in Oshawa real estate and gain equity as property prices start to rise in the area.
However, it is a huge financial commitment – one that shouldn’t be taken lightly. The big purchase involves many upfront, short-term, and even long-term costs. The good news is that you can prepare for many of these costs in advance to ensure smooth sailing.
#1 Down Payment
Ideally, you should save 20% of the purchase price of the home as your down payment. While you may be able to offer less, your interest rates will be higher.
It’s best to crunch the numbers to determine the down payment and find the ideal borrowing plan. You should also consider opening a separate savings account that’s specifically dedicated to your down payment to make the process easier.
#2 Mortgage
The amount you pay for your mortgage will depend on the price of the home you buy, your credit score, and the current interest rate for mortgages. Generally, mortgages can range between 3% and 6%. The mortgage rate can significantly impact your monthly payment, so work on your financial picture to appear more favorable to lenders.
#3 Other Upfront Costs
While the purchase price of the property is the largest initial expense, there are a number of additional costs involved.
- Legal fees for the services of a lawyer or notary.
- Home inspection fees.
- Potential property taxes.
- First mortgage payment.
- Mortgage insurance.
- Upfront repairs.
- Upfront maintenance.
- Moving costs.
- And more.
#4 Upkeep, Maintenance, and Repairs
Please budget for home maintenance, repairs, and upkeep before you buy a home. Regular maintenance, such as changing the air filter, cleaning the gutters, or painting the exterior, can add up over time. Other examples of upkeep are maintaining the lawn, yard, and driveway during the different seasons.
Additionally, emergency repairs such as a broken HVAC system, plumbing issue, and roof repair can also be costly. To stay on top of home maintenance, budget 1-2% of your home’s value each year.
How to Minimize Homebuying Costs
Avoid Emotions
You might feel emotional while buying a home, but don’t let your feelings affect your judgment. Many homebuyers offer more than a property is worth in the heat of the moment, only to regret it later. It’s best to partner with a professional realtor who can negotiate on your behalf and get you the best deal.
Shop Around
Comparing different lenders and getting quotes from each to ensure you’re getting the best possible rate on your mortgage. Please also consider all of the fees and costs associated with each loan.
Inspect Home
Complete a home inspection prior to making an offer to identify any potential repair costs. Not only will this ensure that you aren’t spending more on repairs than necessary, but it may help with negotiations.
Government Incentives
There may be some government incentives that can help offset the cost of homeownership. For example, there may be grants, tax credits, or other financial incentives in the area. Taking advantage of these incentives can result in significant savings.
The true cost of homeownership is often more than the purchase price of the home. There are many hidden costs that you must budget for. Speak to a financial advisor for an accurate assessment. Ultimately, buying a home can be worth all the proactive measures you take.