When you are ready to buy a new home in Ontario, you must consider where you wish to live, how big of a house you want and, perhaps most importantly, how much you are prepared to spend.
While you may ultimately make some concession in some of these areas, spending more than you were planning to can wind up being the costliest compromise you can make.
Why Do People Overspend on a New Home?
Paying more than you planned to on a home is not something people set out to do. Often, it happens for the following reasons:
- They wind up getting caught in a bidding war
- They may become emotionally attached to a home, making them willing to stretch their budget out more to secure it
- They were taking advantage of low interest rates
- They fail to take into account all the financial aspects of home ownership which can result in spending more than intended
- They lack the experience or confidence in negotiating, which can lead to accepting higher prices without bargaining effectively
Besides these reasons, why people choose to spend more than they planned to for a variety of other reasons:
- When there is a low supply of homes, buyers may feel pressured to act quickly and offer more to secure a property.
- Job loss after buying,
- Taking on unexpected expenses, like medical bills
- Having to spend a substantial amount of money on repairing unforeseen issues with the house
- Divorce
Whether people knowingly spend more than they planned to on a house or experience a dramatic shift in their finances afterward, they risk being “house poor.” In fact, nearly one-third of homeowners in Ontario say they cannot afford to pay much more than their mortgage every month.
How You Can Avoid It
Knowing how to avoid overspending on a new home requires careful planning, research, and discipline. Here are some tips that may help you stay within a budget and make financially sound decisions:
- Leaving some breathing room in your budget and sticking to it
- Having money set aside for emergencies
- Taking living expenses in to account when determining your budget
- Seeking financial and legal guidance before buying a home
- Staying patient, not rushing into a purchase. Taking the time to find the right home at the right price
- Working with a knowledgeable, trusted real estate agent who can help you stick to your budget
- Finding creative ways to make your offer more attractive without paying more, like making a larger down payment or waiving contingencies
Your home should feel safe and comfortable, not a place you feel trapped. These measures can help you avoid the financial and of buying a home you may not be able to afford comfortably.
