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  • Action Plans & Tips

    Action Plans & Tips

    Financial Management: Buying a Home

  • Action Plans & Tips

    Action Plans & Tips

    Financial Management: Buying a Home

Buying a home

Buying a house is a dream for many, but it isn't a decision to take lightly. There are several things to consider between the time you start thinking about taking the leap and the day you become a homeowner.

The most important thing is that you have an accurate financial picture of what to expect and budget accordingly. You'll then have to take some precautions considering your new obligations.

1. Keep track your expenses

The price of a home isn't limited to your mortgage payments. Far from it.

Start-up costs can represent between 3% and 5% of the purchase price and include, for example, inspection fees, notary fees, welcome tax and additional costs (moving, connecting utilities, etc.).

If this is your first home, anticipate higher home insurance and heating costs. You should also expect to pay maintenance costs and set money aside for future renovations and repairs.

Once you have all your information, you'll be ready for the next step: making an accurate budget.

2. Make a monthly budget

You must properly budget for a mortgage and home expenses to make sure you have some financial breathing room.

To make a realistic and efficient monthly budget, roll up your sleeves and list all your income and expenses. It's usually easy enough to list your income, but expenses are another matter. If you need help, see 3 steps to drawing up a monthly budget.

3. Take precautions and think about your estate

Now that you're a homeowner, you have more responsibilities and you should be able to live up to them, no matter what happens.

Plan for the following protections. They're available from the lender, your financial institution or a broker. Take the time to compare process and coverage.

Mortgage life insurance

In the event of death, the balance of your mortgage will be paid to the lender. This is useful if you have dependants or if your spouse wants to keep the house after you pass away. Since the property can be sold to pay off the mortgage, find out if mortgage life insurance is necessary in your situation.

Disability insurance

This covers your mortgage payments in case of accident or critical illness that would keep you from working. Pre-existing health conditions, and some illnesses and accidents aren't covered. Make sure you understand the terms of your contract before you sign it. When do payments start? Am I covered in the event of partial-disability?

See a notary or lawyer

If you have a common-law spouse, see a lawyer or notary to establish or review your cohabitation contract. This document lists your respective obligations and rights, and makes things much easier in the event of a separation.

Buying a home is a good time to think about your estate. To make things easier for your loved ones in the event of your death, make a will, mandate in case incapacity (power of attorney) and a living will.

A will is even more important if you're a common-law spouse. In fact, if you die without a will and the house is in your name, your common-law spouse won't be considered an heir and won't have a right to anything.

A will is even more important if you're a common-law spouse. In fact, if you die without a will and the house is in your name, your common-law spouse won't be considered an heir and won't have a right to anything.

Once you make your will, tell your loved ones about your wishes and explain your choices. This will reduce the chances of anyone contesting in the event of your death.

If you already have a will, you may want to review it considering your new role of homeowner.

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