House affordability Plight
We all know it, house affordability in this day and age is next to impossible. House and property value are sky rocketing and its uncertain when the market will cool down. Sure there have been attempts to slow the housing market, like the new foreign tax and housing reinvesting initiatives. Who really knows when that will kick in.
Based on the Canadian Real Estate Association, as of August 2016, the average price of a home in Vancouver/Burnaby is $833,065. If you use one of these nifty mortgage calculators, you can figure out how much you would need to mortgage approval.
You can play with the numbers yourself, but you will quickly notice how little you can afford. It could take 30 or more years to pay it off. Considering the average price of homes, unless you inherit money from your long lost uncle you won’t be able to afford the mortgage payments.
For most of us it looks like basement suites and apartments are the next best thing. Is this it? Or is there a way for us to have a better chance?
To help you answer that, here are a few tips and questions you should be asking yourself if you looking to own your own home one day.
Questions to ask yourself:
Are you mentally and financially prepared?
Buying a house is a big decision and arguably the most expensive purchase you will ever make. It is important to take some time and really think to see if you are ready.
You should start formulating what you are looking for in a house, make a list of wants and needs. Then take a look and be critical, figure out what is a must and what you can live without. It could make a huge difference in your house affordability options.
Things to think about:
- How much down payment are you willing to put down
- Will spending too much upfront mean less money for furnishings and potential construction?
- Try to see yourself in the home, is it somewhere where you and your family could be comfortable in?
- Are you buying for convince, location, the look, or price?
Buying vs Renting:
- Does owning a home give you a sense of accomplishment and is an important goal of yours?
- Are you satisfied with renting and have a landlord to take care of maintenance?
- How much budgeting am I willing to do and for how long?
- Are you able to save some money each month or do you have financial obligations
- Timing is key, how long are you looking?
- Creating a timeline allows you to see how much time you have spent looking for a home
- Have you done enough digging?
- Looking online is great but when comes down to properly looking for a house it would be a good idea to get a Realtor
- A Realtor will help you mind something that fits your needs and wants which saves time
Create an effect budgeting Plan:
Take an honest breakdown of how much you are spending and earning. The best way to do it is by looking at your previous credit card statements. This will give you a breakdown of each expense.
Use the mortgaging tool to see what kind of monthly expense you are looking at. Compare those expenses with how much your household earns per month. Take out your current fixed expenses like monthly bills and utilities. What is left is your variable spending (things like groceries, entertainment, and clothing).
Here is when most people often realize that they need to save more and start dredging all the things they need to cut out. It doesn’t have to be like that, the trick is to make it as inconvenient as it can be but still save you money.
After this, set-up a reasonable monthly budget which takes into account variable, fixed costs, and needs.
Planning for a budget is kind of like changing your food diet.
Figure out what you can’t live without
- This could mean the $6 a day coffee that you just got to have
Eating out vs grocery shopping
- In almost all cases cooking your own food is cheaper
Find alternative forms of entertainment
- If you are planning to go to concert go for it but make sure it fits your months budgetary constraints
- Enjoy the outdoors, there are lots of free alternatives
Prepare for emergencies
- While budgeting, keep in mind the endless things that could come up, set aside an emergency fund
The key to sticking to your budgeting plan is to keep reminding yourself. It may be stressful at times but in the long-run it will pay off. If you need more tips on how stay on top of your budget check out this page.
House affordability in the lower mainland may seem impossible for now but we may never know what will happen in the future. Some say the bubble will pop and eventually prices will fall. If that were to happen it could mean a lot of families losing a lot of money. The best case scenario is if we see a gradual decline in which people can prepare for.
Whatever the case, buying a house in any time of market could be stressful. Keep in mind the steps that were discussed and make it a learning experience. After your first home if you decide to move you will at least have the experience to deal with it.