Do you know what it is like to buy a new house? If you pick the right option, it may become a choice made in heaven. But if you are tempted to invest more than you can or try to quote an unmatched price, unhappiness is bound to keep you on your toes. That is exactly when you may be termed house poor wherein people end up spending a chunk of their income on repairs and discretionary expenses. You tend to move out of your boundary and the home expenses grow beyond normal. But before you declare yourself as house-poor, try to know what it means and how to avoid being in a similar situation.
What does it mean to be house poor?
When you start looking for a home in Kelowna new developments, you may think that the amount mentioned in the pre-approval letter and the price you pay for buying are the only expenses you need to handle. Hold back and think again. Here are a few expenses that most buyers tend to overlook.
Paying for utilities
Your home cannot run without water, natural gas, and electricity. Besides, the other utilities that you will mandatorily need are garbage pickup services and the internet. The mortgage lenders do not factor in the cost of utilities, so you need to add them when calculating your monthly budget and get the services you need.
A new home may not have too many maintenance issues but let the home grow six months old and you are in for repairs. A broken appliance or old carpets are things you need to repair and replace. Therefore, you need to keep an emergency fund ready for the upkeep of your home.
Property taxes are sometimes included in the mortgage payment and at other times they are not. In case it is not included, you need to calculate the property taxes you need to pay every year.
You are house-poor means you spend a large chunk of your income on mortgage and housing expenses. So, you may have little to pay for the other expenses. However, the thumb rule says that you need not spend beyond 32% of your tax-free income on housing expenses. All you need is to multiply your income by 0.32 to determine the number. If you spend less than that number, your finances should be in good shape but if you spend much more on your housing expenses, you may turn house poor easily. So, the next time you search Tower Ranch homes for sale, calculate the expenses well in advance to avoid going penniless.
Tips to avoid becoming house poor
Your home is your haven and a place where you build and nurture your family, welcome your friends, and create memories that last forever. But, some monthly expenses are worth the long-term benefits, so here is how you can avoid becoming house poor. A similar approach needs to prevail if you are planning to move into commercial real estate development.
Do your research
Before diving into real estate development, try to educate yourself about the expenses that you may be tied up with during this process. What is the down payment you are planning to make or the monthly mortgage payment? What about the added expenses like monthly mortgage payments homeowners insurance and property taxes? Can you fix the repairs without hiring a professional?
Create a budget
The household budget you create needs to have basic expenses like food, healthcare, and transportation and discretionary expenses like visiting restaurants and subscribing to streaming services. Besides, you need to consider the payments to be made towards debts like student loans and credit cards.
Stick to the budget
Creating a budget will not help you much unless you know how to stick to it. If you move past the spending limit every month, you will lose your ability to cover the cost of homeownership.
Make a larger down payment
Paying a large chunk of money as a down payment towards your home allows you to build more equity and eventually reduce the monthly mortgage payments. That way you will save thousands over the long-term mortgage payments. Emil Anderson Properties is the one-stop destination for commercial real estate development in Kelowna. The company has been creating housing communities in the most preferred neighbourhoods of Kelowna.
Follow the household and the home-buying budget with equal fervour and avoid being house poor. Before you buy a home in Fraser Valley & Kelowna, create the post-home buying budget and get a grip on your mindless spending habits.