Buying your first home is a thrill, a lifestyle commitment and probably creating the largest debt you will ever take on. But when is large too large? How much house can you really afford?
Here are some tips to help make sure your dream home is a financially comfortable fit.
Look to the long-term
You’re going to be in your home for many years and your financial obligations will change over time. Assess your current annual household income and then consider the financial impact of changes like having children or one day moving from a dual-income to single-income situation.
Look at all the costs
When you’re caught up in the home buying process, it’s easy to overlook costs like closing costs, homeowner’s insurance, home maintenance costs and even the new furniture you’ll need to buy. At the time of purchase, the assessed value of the home is typically increased to match the purchase price. If the previous assessed value was low, the new assessment can materially increase the amount of property tax you’ll have to pay versus what was paid by the previous owner.
Look at your purchase realistically
Once you’ve got an accurate fix on the real cost of your dream home, consider the financial trade-offs you’re willing to make. Maybe a smaller house would give you more lifestyle and spending flexibility? Or are you willing to put your family on a tighter budget in order to afford a bigger home?
Look to your plan
Work with your professional advisor and a mortgage planning specialist to incorporate your housing costs into your overall, long-term financial plan. Determine which mortgage options and payments work best for you. Look at your current spending and lifestyle, how your earning power will change over time, and how much you’ll need to save for retirement.
This column is written and published by Investors Group Financial Services Inc.
Contact your own advisor for specific advice about your circumstances. For more information on this topic please contact your Investors Group Consultant.
