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Budgeting for a New Home: What You Need to Know

Although the path to homeownership can sometimes be bumpy, there are many steps you can take as a new or prospective homeowner to make the process flow more smoothly – and that includes budgeting for all those financial bumps in the road.

Setting up a budget for your household will help keep you and your family’s finances on track, so you and your loved ones can have peace of mind enjoying your new home for years to come. Consider the following:

Before You Buy

Find out how much home you can afford

Before you even begin the house hunting process, you need to figure out how much mortgage you can actually afford. Without knowing what you could comfortably afford, you risk taking on a bigger mortgage than you could realistically pay off, which could spell disaster.

Before you begin looking at homes, it’s wise to do the following:

  • Figure out your household take-home pay after tax – this will help you figure out how much you will have each month to put towards your mortgage, bills, groceries etc. If someone in your household has an irregular income, take the average of the last 12 months’ pay.
  • Outline your recurring household monthly expenses, including hydro, home insurance, property tax, etc. Make a note of which ones are necessary (like hydro,) which ones are optional (like entertainment) and which are flexible (like groceries.)
  • List the new expenses you will have when you own your home, such as maintenance fees for a condo or townhouse, and property taxes.
  • Determine how much you will have left over for housing – this will help you figure out your maximum mortgage payment.
  • Finally, use this to determine how much home you could afford. You can also use a mortgage payment calculator to determine that maximum purchase price you could afford based on potential monthly mortgage payments.

Inquire about monthly fees

If you’re simply looking at the asking price of a home, you may not be getting the full picture. While you’re house hunting, be sure to inquire about any fees associated with properties of interest, such as condo fees or municipal taxes.

Monthly fees can differ between various types of houses, and can sometimes increase your monthly expenses significantly. Consider, for example, that in 2017 the average maintenance cost on a 594 square foot one-bedroom condo in Toronto was $386.60/month. Not accounting for monthly fees in your new home budget can leave you little room for savings and other necessities.

When You Buy

Don’t forget about moving costs

If you’re a first-time homeowner transitioning from living with parents, you may not have all that many large items to move into your new home.

If you’re moving from a home or apartment however, you’ll probably have a decent amount of furniture, electronics, and even appliances to bring to your new abode. That’s why it’s important to account for moving costs when drawing up your new home budget, so that you’re not left having to dip into your renovation budget, your yearly vacation budget, or any other savings in order to take care the costs associated with moving into your new home.

According to RateSupermarket.ca, moving a fully furnished three-bedroom, two-story home could cost up to a whopping $6,276. Being aware of the cost of moving before closing day comes around can help you get a head start on carving out your moving budget.

Prepare for renovations and routine maintenance

Besides the downpayment, closing costs, and other fees associated with your new home, you’ll want to carve out a portion of your budget for any renovations you might want to do before moving in, as well as routine maintenance costs that will come along down the line.

The best time to do any medium or large renovations is before moving in all your furniture and belongings, so that you have the free space to renovate without worrying about damaging any possessions. Set funds aside for installing new flooring, replacing kitchen cabinets, finishing the basement, or any other renos you might have in mind, so that you can jump right into renos after closing day.

As for routine maintenance, a rule of thumb is to keep 1 per cent to 2 per cent of your home’s value each year for upkeep, including repairing plumbing, replacing the roof, patching up drywall etc.

After Closing

Determine your monthly budget

One of the most important things you can do to help ensure you and your loved ones are financially stable in your new home is to prepare a monthly household budget, and stick to it. Start monitoring your spending each month to see how much is going towards necessary expenses, and if there are any optional expenses you could cut back on. If you find you’re not getting any closer to your financial goals, it might be time to cut back on expenses and start spending less where possible.

Find the right insurance

For many Canadians, a home is the single biggest financial investment they will make in their lives – isn’t it worth protecting with the right insurance coverage?

At Desjardins, we understand that you and your family have unique needs – that’s why we offer various types of home insurance options tailored to you. Plus, with our multi-line discount, you can save money when you insure your vehicles as well.

Get a quote or call us today to speak directly with one of our licensed insurance advisors, and see how Desjardins can help you protect your home while helping you save.

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Budgeting for a New Home: What You Need to Know

Owning a home can be one of life’s most rewarding experiences. As with all rewarding things in life, however, homeownership also comes with its fair share of stressors – especially of the financial variety.

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