3 Debt Relief Secrets for First-Time Home BuyersApr 23, 2019
You’re ready to buy your first home. It’s a great feeling, but you also realize that home ownership is expensive and your mortgage is going to add significantly to your debt. You can find relief from the worries that go along with buying your first home. Knowledge is key. Knowing that you can afford it, understanding how to manage your mortgage and non-mortgage debt, and awareness of the extra expenses that come with a growing family.
The prices of both houses and condos continue to climb in Hamilton. While mortgage stress testing has made it harder for millennials to get into the housing market, Hamilton is more affordable than some other Canadian cities, making it a little easier to attain the status of homeowner.
As a millennial, you’re in a more challenging position than older generations were at your age.
The rising cost of post-secondary education leaves some millennials with large student loans, and it can be difficult to establish yourself in a well-paying career.
Affordability has been such an issue for millennials that many of them are putting off having children as they try to create a stable financial situation.
With all of that, it’s no wonder you might be wishing for debt relief, and find yourself worried about taking on more debt.
Here are three (not-so-secret) secrets to help you manage debt when buying your first home:
- Create a homeowner’s budget months before you buy a home. Are you anxious about what life will be like once you’re shouldering the mortgage payments and the added expenses of home ownership?
There’s good reason for that. Owning a home is about 40 per cent more expensive than renting. So even if your mortgage payment is less than or equal to what you pay in rent each month, more of your money is going to be going toward shelter.
Use this tool to figure out your ongoing housing expenses. See if you can actually afford to be a homeowner by setting aside 40 per cent of your housing budget each month. Is it doable? If it isn’t, can you cut costs so you can manage it?
If you can’t comfortably set the extra money aside, you’re going to end up taking on additional debt to cover your costs. That can lead to overwhelming debt, or even filing for bankruptcy in the future.
- Reduce debt as much as possible. Your mortgage is going to add a lot of debt. While it’s considered “good debt”, it can still weigh on you, stressing you out, and it could derail your finances.
If you’ve been having trouble reducing your non-mortgage debt, start by improving your financial literacy. Then choose a debt reduction strategy and stick to it.
If it’s impossible to find the extra cash to reduce your non-mortgage or consumer debt, consider talking to a professional. A Licensed Insolvency Trustee will explain your options, including how to best use the money you’ve saved for a down payment.
- Consider how homeownership will affect other life goals. Our 2018 Affordability Index survey told us that 80 per cent of Canadian homeowners say that saving for retirement is a struggle. Is owning a home worth having a difficult time saving for your later years?
As your family grows or ages, their needs will change. How affordable will it be to own a home when you have to pay for extracurricular activities, post-secondary education, renos and repairs?
Starting to save for some of these extra costs now can help you feel less anxious about the cost of home ownership while helping to ensure that you’ll have the money when you need it.
There are few decisions as anxiety provoking as making the biggest purchase of your life. Getting debt relief and planning how you’ll manage increasing expenses in the future can help. Implement these three tips so you’re ready to make the leap in a way that doesn’t risk your family’s financial future.
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