Home buying is a daunting task to take on. It might seem impossible to get all your financial ducks in a row to embark on this journey, but really, all you need to do is consider a few essential things and you’ll be on the right track! You want to buy a house? Well, you can start here and plan out the skeleton of your savings plan before you find the place that’s right for you.
How much money do you need to buy a house?
The average price of a house in Canada is $500,000. In the USA, it’s $300,000. According to the Canadian Real Estate Association, home sales and listings in Canada are increasing rapidly in the past months. As more people are looking into buying houses, it’s important to consider how to plan for your own home-buying.
The house you can afford will depend on your income and downpayment. You can use Ratehub’s mortgage affordability calculator to see what you can afford when it comes to buying a home. This calculation is based on your current debt, income, and living expenses.
You need to have a downpayment of at least 5% of the home’s value
But, you should have a downpayment of at least 10%. If you can only afford to put down 5%, chances are you’re not ready to become a homeowner. In order to maintain some extra cash in your monthly budget and prepare for volatility in the real estate market, putting at least 10% down on your first home is essential. This extra 5% will ultimately protect you and your money.
You may want to consider using your RRSP to fund your downpayment. The First Time Home Buyers Plan lets you withdraw up to $35,000 from your RRSP to use for a downpayment. Your downpayment is about savings. So, be consistent and eventually the right moment will come for you to buy a house!
Don’t forget closing costs
- Home inspection-$150-$300
- Realtor fees- $7,000 (approx 3% of sale price)
- Land transfer taxes-$2,500
- Appraisal- $200-$400
- Credit report- $0 from Borrowell ($30 to $50 otherwise)
- Owner’s title insurance- $500
- Property taxes- $1,000
- Homeowner’s insurance- $2,000
You should aim to save for these costs alongside your downpayment. A high interest savings account will help you save fast!
What kind of credit score do you need to buy a house?
What happens if I don’t have a downpayment for a house?
RELATED: How To Save A Downpayment
So, are you ready to save?
Buying a house is a huge step for you and your finances! And if you want to take this new part of your life seriously, you must be prepared. It is essential to do the research, consider how much a house will cost you, and make a plan for saving that works for you and will ensure you can reach your intended home-buying goal.