Does homeownership seem to be out of reach for you?

Homeownership means different things to different people. There are a variety of reasons people give for wanting to buy a home.

  • If you live in fear of renovictions and rent hikes, homeownership means having stable housing.
  • Some people want the freedom to accessorize and decorate the way they want, which is possible when you own your home.
  • Owning your home allows greater freedom in general.
  • A room or suite can be rented out to help pay the mortgage.
  • If you are a caregiver or expect to become a caregiver, you may want the person in need of care to live with you.

A common reason people give for wanting to buy a home is that there are short-term and long-term financial benefits to owning a home.

Financial Benefits of Homeownership

As already mentioned, there are short-term financial benefits in owning a home:

  • You can rent out a room or suite to help pay the mortgage.
  • There won’t be an unexpected hike in mortgage payments if you lock payments in for a set term.
  • You won’t experience a renoviction and be forced to find more affordable housing.

There are long-term financial benefits to homeownership as well.

  • If you currently rent but you are purchasing a home, initially the mortgage payments will likely be more than what you paid for rent. However, at some point the amount you would have been paying for rent will be more than your current mortgage payments. The amount of rent will keep increasing. A mortgage payment will only fluctuate based on the interest rate applied to the mortgage.
  • Homeowners will be free of making monthly payments when the mortgage is paid off.
  • Since monthly payments will cease when the mortgage is paid off, it can make it easier for a homeowner to decide when to retire. You will still have to plan to pay property taxes and other expenses for owning a home. However, the amount for these expenses should be less than the rent you would otherwise be paying. If you rent, you will have to pay rent forever. This can make it hard to decide when to retire if you will make less in retirement than you are making now.
  • Another benefit of having no monthly mortgage payment is that it may allow you to remain in your home longer. If you rent, you may need to move to a place where rent is geared to income if your retirement income will be less than what you make now.

Funding Retirement and Long-Term Care Home Living

Money from a home sale can fund a move into a retirement or long-term care home that provides a great level of care.

If you live on a low fixed income with no home to sell, options for retirement and long-term care homes are limited. The end result is often poor living conditions and receiving a substandard level of care. Infections and viruses spread like wildfire in homes where there are 3 or 4 people sharing a room.

Homeownership – The Budget

Are you reluctant to buy a home because of not knowing how you will need to change your budget? We can help break down the barriers you face in buying a home, which includes having a budget.

It’s important to have a budget when buying a home. The budget should include:

  • Putting together a down payment.
  • Having the money to make the mortgage payments.
  • Covering the other costs associated with buying and maintaining a home.
Money in the Bank
Money in the Bank

We believe a long-term budget is the way to go. However, the budget on its own is not the whole solution. It’s just a piece of the puzzle. The most important piece of the puzzle is seeing how the budget will play out in real time. This is where the magic happens.

You can put your heart and soul into creating a budget, but you can still experience a cash crunch if there is a peak in expenses when income is at a low. This is why it’s important to see how a budget will play out in real time. It makes it possible to predict and manage potential cash crunches. Managing a cash crunch is crucial when it comes to making mortgage payments.

We have software that makes it possible to create a long-term budget and see how it will play out in real time. Individual and group instruction is available on how to use the software to create a budget for buying a home. If there is debt to get under control, we can walk you through using our software to deal with debt.

Here is a link to more information. https://moneymeasuresinc.com/the-approach/

Debt – An Obstacle to Homeownership

Debt impacts credit scores. Credit scores matter to lending institutions, so it’s important for you to have the upper hand when it comes to debt. It’s better to have control of debt versus allowing debt to control us. https://www.consumer.equifax.ca/en/personal/products/credit-score-report/

Credit Score
Credit Score

Debt impacts the mortgage stress test. https://www.forbes.com/sites/forbesfinancecouncil/2021/08/27/canadas-mortgage-stress-test-what-does-it-mean/?sh=17e3be2c1dc1

People and lending institutions view debt differently. You may think you have a handle on debt and have every intention of making the mortgage payments. However, lending institutions won’t seal the deal with a first-time homebuyer on a handshake that’s based on the promise to pay.

The Choice for Homebuyers

Some first-time homebuyers buy their dream home, but it leaves them house poor. They are unable to furnish their home the way they would like because of having high mortgage payments. It leaves them living pay cheque to pay cheque.

Other people buy a home that’s affordable so they will have money to decorate and furnish the place the way they want. There will be some wiggle room in the budget. They buy an apartment-style condo or a townhouse condo instead of a detached home because buying a detached home would leave them house poor.

Here are links to information you may find helpful as you consider your options and do a budget.

https://www.cmhc-schl.gc.ca/en/nhs/canada-first-time-home-buyer-incentive

https://www.regionofwaterloo.ca/en/living-here/funding-to-help-buy-a-home.aspx

https://www.regionofwaterloo.ca/en/living-here/financial-assistance.aspx

A Few Housekeeping Items

When you create a budget for buying a home, don’t underestimate or forget about things like legal fees and also condo fees if you choose to buy a condo. A condo complex with a pool may appeal to you, but the condo fees may surprise you. There can be quite a range in condo fees depending on the age of the complex and the amenities available.

As you work through the mortgage approval process, it’s important to be clear on whether the lending institution is considering you to be pre-qualified or pre-approved for a mortgage. There is a difference. We don’t want you to be blindsided when you find a home you want to put in an offer for. Here is a link to some information to get you started. https://www.cmhc-schl.gc.ca/en/consumers/home-buying/buying-guides/home-buying/finance-your-home

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