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.
When to buy a home
First, how do you know it’s the right time to buy a house? Before you even think about starting the steps of the home-buying process, there are a few things you should do:
Consider the housing market. If you want to make a smart investment on your home purchase, you need to buy a house that'll go up in value. Talk to your real estate agent about home values in your area and their potential.
Evaluate your finances. Make sure you have a consistent income and raised cash for a substantial down payment. Buying a house before you’re ready can lead to financial disaster.
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.
Keep track your expenses
The price of a home isn't limited to your mortgage payments. Far from it. You should plan for additional expenses which include bond registration and transfer costs, moving costs, security, insurance, general repairs and maintenance, rates and levies, utilities (e.g. wifi etc). Once you have all your information, you'll be ready for the next step to make an accurate budget.
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.
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.
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?
Your mortage lender might insist that you have homeowners' insurance in place to cover any structural damage to the property. This is generally affordable with competitive options available to you.