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April 05, 2021

Home ownership doesn't come cheap

904328_52196889For many Canadians, the dream of home ownership is just that -- a dream.

Buying your first home is probably one of the biggest financial decisions you will ever make.

So before you jump into making the dream a reality, it is important to do your research and find out the true costs of home ownership before you get trapped in a financial nightmare -- much like the movie Money Pit.

Jeffrey Schwartz, executive director of Consolidated Credit Counseling Services of Canada, explains, " We have this notion that in order to be successful, you have to get an education, get a job and buy a home.

"Unfortunately, what we see happening is an increasing number of first-time home owners who have bitten off more house than they can chew -- which often results in financial crisis."

A word to the wise: Your first home doesn't have to be your dream home. Your first home can be the foundation for a financially successful future.

Here are some tips to keep in mind while doing your new home research:

- Check your credit: Your credit score impacts the amount of money a lender will give you and at what interest rate. Get copies of your credit reports before house hunting and if your scores are low or if there are errors, take the time to repair your credit;

- Research the true costs: Assess all of your monthly costs associated with home ownership including mortgage payment, property taxes, insurance, utilities and any other fees;

- Learn to budget: Go over your budget and calculate how you will be able to afford to carry a mortgage and other costs associated with owning a home;

- Pre-approval: Before house-hunting it makes good sense to get pre-approved so that you know just how much house you can qualify for;

- Buy what you can afford: Even if you have been pre-approved for a substantial mortgage, make sure you can actually afford to carry it. You don't want to spend all your money on the mortgage. Go over your budget to see how much mortgage you can realistically afford while not compromising the lifestyle you want to live;

- Put at least 20 per cent down: The more down-payment you have, the lower your mortgage will be. Anything lower than 20 per cent is considered a high-risk mortgage requiring mortgage insurance;

- Get your house in order: Consider all the costs associated with home ownership including closing fees, lawyer's fees, home inspection, land transfer taxes, utility hook-ups, renovations, and any home furnishings or appliances you may need to purchase;

- Save for a rainy day: Be prepared for the ongoing and sometimes unexpected costs of owning a home. These costs may include maintenance fees, repairs etc. It is always good to have emergency funds on hand in case the unexpected arises.

And just like the movie Money Pit -- if the deal sounds too good to be true...it probably is.

By Donna Donaldson, MSN Money

Do you hope to some day own a home? Have you done your research?





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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...