Home Ownership: What Are The Monthly Costs ?
Author:
Laura Chanin
Date: August 3, 2015
Most people aspire to own real
estate, in part because they need somewhere to live and owing your
own place provides security. At the same time by paying down the
mortgage each month, you are building equity. Real estate is a
tangible asset which is also satisfying for people.
But how much mortgage can you
really afford? When you buy a home, whether it is a condo or
townhouse or house, there will be maintenance costs. There are also
utility costs i.e. BC Hydro and/or Fortis Gas. Many cities charge
water and utility costs throughout the year. Monthly you will also
have property taxes that are based on the value of your home. In all
these costs can be a significant amount of money.
But the biggest cost for a new
homeowner, particularly in Vancouver will be the mortgage. Mortgage
rates are very low, but will increase at some point in the future.
We don’t know when, but when they do increase mortgage costs will
also increase.
Here is an example for someone
wanting to purchase a new place at a cost of $400,000. In some parts
of Canada that might get you a beautiful home. In Vancouver, it is
probably a condo.
Ideally you have 20%
downpayment, or $80,000. Otherwise there are insurance costs added
to the mortgage amount. In this case a $320,000 mortgage at 3%
interest would be $1,514/month
Here is a sample of the
monthly costs:
-Mortgage $1,514
-Maintenance $200
-BC Hydro $50
-Fortis $50
-Property Taxes $200
-Utility $50
-Total monthly
costs $2,064/month
After living in the home for 5
years and paying the mortgage regularly, the outstanding balance will
have decreased to $273,518.
The banks and financial
institutions have ratios that show the maximum that each person is
allowed to borrow for a mortgage based on their income. To find out
how much, it is best to contact a mortgage advisor for
prequalification.
So, the monthly costs of home
ownership do add up. How much will it really cost you depends on the
place you are looking at. You also need to consider your financial
goals and the rest of your financial picture. Ideally you don’t
end up house poor with no money to do anything else. It is important
to balance your goals and investments. To help make an informed
decision, please contact a CERTIFIED FINANCIAL PLANNER ®
practitioner.
Mortgages First-Time Buyer Financial Planning Financing
