Perhaps the best reason to protect your credit is that good credit will help you obtain a mortgage when it comes time to buy a house, and at the best possible interest rate.
If you’ve decided it’s time to get on the property ladder, you need to be realistic about your financial management abilities and your employment stability. Remember, too, that a home costs much more than its price tag: you must also factor in property taxes, condo fees, utilities, insurance, maintenance and repairs, and all the other costs of ownership — they quickly add up.
When you’re deciding how much home you can afford, first take a good look at your household expenses and your reliable income. As a general rule, your total housing costs for mortgage repayment, taxes, condo fees and utilities shouldn’t be more than about 30% of your gross (before tax) monthly income.
Ideally, you want to save for a down payment 20% or more of the price of the house you want. You can under some circumstances in Ontario obtain a mortgage for 95% of the value of the home, but you’ll have to pay insurance fees to Canada Mortgage and Housing Corporation (CMHC) that could cost you thousands.
Before you shop, visit potential lenders and get preapproved for a mortgage. Your lender will decide how much home they think you can afford. Canadian mortgage laws are pretty strict, but it’s still possible to become overextended. It’s in the bank’s best interest to loan you as much money as they can; since they have your house as collateral and you’ll pay thousands in interest before you even begin to pay off the principal amount, they can’t lose. Don’t give into the temptation to buy more home than you really need.
Remember you’ll also need to have several thousand dollars put aside for title searches, lawyer’s fees and the like.
It can be daunting, but real estate has a reputation for outperforming the stock market in the long haul, and it’s about the only investment you can use while it appreciates. If you own your home outright, it could be a substantial part of your retirement savings. This all makes owning a home one of the smartest financial moves you can make.
If your debt load is preventing you from owning a home of your own, there are steps you can take to pay off your debts faster. Call a qualified Credit Counsellor for help today.
