Canadian homebuyers are going to have to dig a little deeper in their pockets than they expected. A large portion of the prospective homebuyers have had a rude awakening about how much they are going to have to spend to buy a house. The recently released BMO Fall Home-Buying Report showed that 43 per cent have come to the realization that they are going to have to spend more money than they first thought.
Four out of ten Canadian house hunters have increased their price point by an average of 21%, which equates to a budget increase of more than $80,000 from when they first started shopping. Atlantic Canadians led the way; accepting they’ll have to spend 32% more than they planned while Quebecers (17%), Ontarians (21%), Prairie residents (24%), Albertans (20%) and British Columbians (19%) are also resigned to increasing their spending limits.
The report showed that a majority of new homebuyers were naÃ¯ve about real estate prices, while others saw prices rise right before their eyes:
- 86% say housing prices have risen since they first started looking
- 81% say they now have a better understanding of current prices
Jeffrey Schwartz, executive director of Consolidated Credit Counseling Services of Canada, says rising home prices are a burden –
“Huge mortgages can make living debt free seem like an impossible dream,” laments Schwartz. “But this just makes it all the more important to learn how to manage debt and how to budget in order to have a stable financial future.”
Martin Nel, Vice President of Personal Banking Products at BMO, says it’s important that home payments fit into a responsible budget –
“When assessing whether or not a new home is financially realistic,” says Nel, “it’s important to consider that housing costs – including mortgage payments, utilities and taxes – should not take up more than one third of your total household income.”
With that in mind, Consolidated Credit has compiled a list of tips to ensure the purchase of a home is not something you end up regretting –
- Buy less, not more – It’s tempting to overreach when you are buying a home. People start to think about the things that they want, and not what they need. Generally, buying a smaller home (with a smaller price tag) will keep mortgage payments manageable and help you become debt free quicker. So, instead of buying too much house and taking on too much debt, make the responsible choice and buy something more reasonable.
- It’s not just the home price – Expenses related to a home purchase don’t stop with the actual purchase price. When making a decision about which house to buy, make sure to factor in property taxes, management fees, land transfer tax, moving costs, security deposits, legal fees, heating and cooling costs, expected maintenance, and compare how the locations will affect your transportation budget. These costs may not seem as important as the home price, but they will add up over time and should be taken into consideration before you buy.
- Save on furnishings – Anyone who has ever moved into a new or larger home knows how expensive it can be to furnish it. New sofas, beds, curtains and more can add thousands of dollars to the home price. When you already have a large mortgage payment due each month, the last thing you want to do is to take on more credit card debt. Look for used furnishings that you can afford within your monthly budget, and don’t make paying your off debt even harder by purchasing home furnishings on credit.
If you want to learn more about making responsible financial decisions, check out Consolidated Credit’s free Personal Finance educational section. If you’re struggling with debt, call one of our trained counsellors today at 1-888-294-3130 for a free debt analysis.