Whether you are a first time buyer in Airdrie or Calgary, moving up or moving out of the city to fulfill your acreage dream, budgeting is paramount. The first step is to contact your bank or mortgage broker to find out what you can afford – there now you have a budget right?! Not so fast! When approving you for a mortgage they will ask you a series of questions about your employment, debt, expenses and then calculate an approved amount for your mortgage. One of the first questions you need to ask is “How much will my monthly payment be?”. Once you have that number then you can start to budget.
Although banks use percentages to account for living expenses they will never know exactly how you live financially. That’s why you have to do some number crunching yourself. Start by being honest about how much you make – how much actually goes into your account each month. If you are employed with a steady paycheck this will be easy to figure out – but make sure you don’t add in “bonus” money because you might not be able to count on it. If you are self employed you may want to base your budget on a low income month or on an average. Now that you know how much you make, figure out how much you cost.
When you first start looking at the budget use the monthly mortgage payment amount for the maximum amount you are approved for. If you need to adjust your budget later you can consider spending slightly less on a home or putting more of a down payment down so that your mortgage is smaller. With a home comes property taxes. If you buy a home where the annual property taxes are $2400 you are going to have to save $200 a month to pay that bill in June. Think about your transportation costs, it’s not just the car payment it’s gas and insurance too. Make sure you add in recreational vehicles as well (including their storage costs). Be realistic about how much you spend on food in a month. What about fun? If your kids are involved in sports or other activities there is usually a cost. Utilities are are important too. If you are moving up that extra square footage is going to cost more to heat. If you are first time buyer you might need to research what it will cost to provide heat, electricity and water to a home. If you are moving to an acreage you might need to consider costs like buying a riding lawn mower. I am by no means a financial planner but I’m sure they would suggest budgeting for emergency and maintenance funds as well as planning for your future.
I know this can seem overwhelming – they have an entire TV series dedicated to the topic of budgeting. Just take it one item at a time. If you get realistic about your costs and create a balanced budget you are more likely to enjoy your new home.
