We talk a lot on our team and with our clients about what we call Responsible Home Buying. Obviously, this can mean a lot of things to a lot of people and I am not telling you what you should or shouldn't buy (it's your money) but there are a few unfortunate trends we try to help our clients avoid. This is the first of a three-part series where our only goal is education. We are living in a new economy in Calgary and because of this new economy we need to think a bit differently about the home buying process. Check back form parts two and three over the next couple weeks and-as always- don't hesitate reach out if you have questions or concerns about buying a home.
What you are comfortable spending vs what the bank says you can afford
This drives me crazy: just because the bank/lender/broker says they will give you $500,000 doesn’t mean you should run out and spend every penny! Look at what $500,000 costs on a monthly basis, compare that to the lifestyle you live/want to live, keep in mind how long you plan on staying in the home and what your next steps are.
If you max out your budget can you still afford to live the life you want i.e. take a vacation once in a while, maybe a new car or a nice bottle of wine at dinner? Do you want to have a big chunk of your monthly income tied up in your house or is it best for your situation to cut your budget back by 5,10,15 percent and have more of your money for the other things in life (or to pay off your mortgage faster)? If something unexpected comes up (home maintenance, health concerns, a lifestyle/employment change, etc) are you going to be in a tight spot because of the house you bought? Being 'house poor' is not a fun way to live and we don't want you to be in a place where you can't comfortably manage the costs of owning a home.
When we bought our current house we spent just over 50% of what the bank told us we could spend (we actually stopped working with that particular broker because we felt if she was trying to up-sell us, she was probably doing the same thing to our clients). We work in a business and a city that is known for its ups and downs, Allison was four months pregnant, we didn't really want to change our lifestyle and frankly we didn't need a house any larger then what we bought.
Over the years we have seen countless people get into financial trouble because of their home purchase. Sometimes it's things you can plan for; job loss, health concerns, etc but sometimes it's because our eyes are bigger then our stomachs (that's what my mother used to tell us at the buffet at the Sizzler when we were kids, I think the sentiment works here). It's easy to fall in love with a home that stretches your budget/comfort-level it's also easy to walk into a new home sales centre and walk out with $25,000 worth of upgrades that could be the difference between comfortable and uncomfortable.
In nearly 13 years selling real estate I have never had a client say 'damn, I wish I had spent more money'
This is really only scrapping the surface when it coming to budgeting and financial planning. I am neither a mortgage broker nor a financial planning but I am an advocate for fiscal responsibility and helping our clients set themselves up financially through their real estate dealing. I also know some great Brokers and Financial Planners that I would be more than happy to introduce you to.
Want to hear more or discuss your situation? Please reach out anytime by phone 403.975.0910 email Craig@BannardRushton.com or by filling out the form below.