Three Important Financial Factors To Consider When Buying Your First Home

Three Important Financial Factors To Consider When Buying Your First Home

It’s September and, along with the cool weather, that means the real estate market is back in full swing. Often buyers and sellers take a break during the summer, these months are filled with outdoor activities, BBQs and vacations, so this leaves little time to go house hunting.

But now that everyone is back into their regular routine the number of people actively looking for a new home starts to go back up.

When buying your first home there are a few important financial factors to consider. Not only will this be one of the biggest purchases of your life, but your home also drives a lot of on-going costs as well. These on-going costs can impact your budget for years to come.

Buying the wrong house might mean extra costs you didn’t anticipate or don’t have room for in your budget. This can mean years of financial pain and tight budgets.

Buying the right house means you’ll have lots of room in your budget to do all the things you love to do, travel, hobbies, restaurants etc.

When buying a house there are three very important financial factors to consider.

How To Immunize Yourself From Rising Interest Rates

How To Immunize Yourself From Rising Interest Rates

Interest rates are going up and that’s putting a squeeze on anyone with debt. Whether it’s a mortgage, student loans, or a line of credit, you’re about to feel the sting of higher rates. We’ve had unprecedentedly low rates for almost 10 years now and forecasters have repeatedly called for higher rates, and it seems that they’re finally right.

The Bank of Canada just increased their rate again making this the 4th increase in the last 12 months. That increase means we’re being charged an extra 1% interest on variable rate debt versus last year. It also means any we’ll be charged an extra 1% on any new fixed rate debt. On a $350,000 mortgage that’s an extra $3,500 per year in interest charges or about $300 per month!

Rising interest rates impact all kinds of financial products. Variable rate mortgages, new fixed rate mortgages, lines of credit, home equity lines of credit and of course, student loans too.

Not only are we paying more for our current debt but rising interest rates also make it more difficult to qualify for a new debt too. Higher rates will decrease the amount of money you’re qualified to borrow. A household earning 80,000 per year will see their home buying budget decrease by $28,000.

There are a few strategies you can use to immunize yourself from the impact of higher rates, at least for a short period of time. From a few months, to a few years, to a decade, these strategies can help you avoid the sting of rising rates.

What Is Mortgage Insurance? And Why Do I Need It?

What Is Mortgage Insurance? And Why Do I Need It?

Mortgage insurance is one of those things that most first-time home buyers run into when buying a home. Unless you’re lucky enough to save up a 20% down payment you probably need to get mortgage insurance on your home.

So, what is mortgage insurance exactly? And why do you need it?

Mortgage insurance is a requirement for all homes with under 20% down payment (Some banks even require it for down payments of 20%+. But in those cases it’s the bank making that decision, it’s not actually mandatory).

Mortgage insurance helps protect the lender in case you default on your mortgage. It’s a way to provide stability to the housing market. The largest provider of mortgage insurance is the CMHC, a federally backed agency. This means that the federal government is essentially backing the Canadian housing market, and this adds a lot of stability for buyers, sellers and lenders.

How Do I Make Mortgage Payments?

How Do I Make Mortgage Payments?

Getting a mortgage for the first time can lead to all kinds of questions… one of those questions might be “how to do repay my mortgage?” or maybe you’re wondering “how do I make mortgage payments?”.

As a first-time home buyer you probably have no experience with mortgage payments, and you probably have a few questions. Sure, maybe you overheard your parents talk about their mortgage, or maybe you have a few friends with mortgage payments already, but if you’ve never had a mortgage yourself, you’re probably wondering how you make payments.

By comparison paying rent seems easy. When you’re a renter you sign a lease, hand over some checks, and the money comes out of your bank account each month. Pretty simple right?

But there is something about a mortgage that makes the whole thing seem a bit more daunting.

Things get even more confusing when you realize there are different types of payments. You have regular mortgage payments, top-up payments, and lump sum payments. You can also choose the frequency of payments, monthly, semi-monthly, bi-weekly etc.

Often these are things you’ll need to consider before signing your mortgage contract.

In this post, we’ll cover some of the different types of payments, fees you may face if you break your mortgage and some tips for changing payment dates and payment frequency.

This is good information to know before you sign your mortgage contract.

How Mortgages Work When You’re A First Time Home Buyer

How Mortgages Work When You’re A First Time Home Buyer

Buying a home is a HUGE decision. Not only is it a lot of money, but there are multiple contracts to sign, and multiple people/parties involved. It’s a lot of responsibility. Plus, it’s a decision many of us will make before our 30th birthday.

One of the contracts you’ll need to sign as a first-time home buyer is a mortgage contract.

Signing a piece of paper and getting $100,000’s in return can be a surreal experience. Often, you’ll only put up a small fraction of the purchase price yourself and the rest will come from the bank. You put up $20,000 and they give you an additional $380,000 to go buy a house. Crazy!

As a first-time home buyer, it can be a nerve-wracking to take on all that debt.

Before signing a mortgage contract it’s a good idea to understand the basics of how a mortgage works. How much your payments will be. When your payments will occur. And probably most important, how much of your payment goes towards your loan.

How Much House Can You Afford?

How Much House Can You Afford?

Before thinking about buying a home you need to decide how much house you can afford. Housing represents 35%+ of a typical household budget but buying the right amount of house will depend on your other financial goals.

Buying a house is one of the biggest financial decisions you’ll ever make. Amazingly, about half of us will make this decision before our 30th birthday.

According to Statistics Canada 50.2% of Canadians have purchased a home by age 30. Not surprisingly this is down from previous generations where 55.5% had already purchased their first home by age 30.

Making one of the biggest financial decisions of your life can come with a lot of questions, especially when you’re making this decision at such a young age.

One of those questions might be “how much house can I afford”?

Like many big questions, there isn’t just one answer. If anything, this question just causes more questions.

To figure out how much house can you can afford, you really need to ask yourself a few more questions before coming to the right answer.

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