Thinking of buying a new home? As exciting as it is to buy a new home, it’s also a little intimidating from a personal finance perspective. But remember, though you will have a mortgage to pay each month, you’ve just made a fantastic investment in your future! Instead of throwing money away on rent, you’re building equity in your most important asset: a home. Get off to a fantastic start by making a few financial and lifestyle changes.
Becoming a $mart Home Owner!
Before you jump in, it’s smart to figure out exactly how much homeownership will really cost you so that you can make smart decisions from the beginning. Below are a few of the most common costs you can expect once you take possession of the keys:
Mortgage payment – Depending on your loan, your home mortgage payment may be fixed or it could go up over time. If you have an adjustable rate loan, your payment may start low, but could potentially rise over time; if you have a fixed loan, it is guaranteed ‘fixed’ for a predetermined amount of time. It’s a good idea to seek advice from a few trusted sources on what option is best for you.
Property insurance – Your lender requires property insurance which is an expense that may be new to you if you’re a first time buyer.
PMI – If your down payment is less than 20 percent, you will likely be required to pay for private mortgage insurance each month. Because PMI can be costly, try to obtain a loan without PMI requirements.
Utility bills – Unlike apartment living, you will be responsible for all utility bills including phone, electric, gas, water, sewer, cable, and property taxes.
Intelligent Money Management Tips for Homeowners
Become Financially Savvy – Buying a new home requires sound financial management. Fortunately, there are ways to cut costs with many of the items listed above as well as elsewhere in your budget. For example, you could cut your property insurance costs by bundling your homeowners insurance with your auto insurance policies which could get you a multi-policy discount. You may also qualify for discounts if you have a home security system, smoke detectors, or other safety features in place.
Save for Repairs and Maintenance – As a new homeowner, you have the benefit of warranty coverage on many of your home’s systems, and certainly extensive coverage under Tarion (Your New Home Warranty). However, it’s a good idea to set aside a portion of savings for repairs or planned home improvements.
Become a Do-it-Yourselfer – Consider doing your own gardening, pest control, pool cleaning, and housekeeping rather than hiring services to do these tasks for you. Not only will you save money each month, you’ll likely feel a greater sense of pride in doing it yourself.
Become an Energy Miser – Buying an energy efficient new home is a fantastic start. Ensure that your thermostat is programmable, that way you can save on heating and cooling costs during the night, or when you’re not at home. While you’re at it, consider using LCD lightbulbs in your new home as they use a fraction of the amount of energy as their incandescent and CFL counterparts. While LCDs used to cost $20 or more per lightbulb, costs have fallen dramatically and they’ll quickly pay for themselves. Not only that, they have an expected lifespan of up to 20 years, so no ladders are needed for lightbulb changes!
Bundling services, establishing savings, installing energy-saving appliances, and performing regular home maintenance are all smart financial management moves for new homeowners, that can make your transition from ‘renter’ to ‘owner’ easy!
