With interest rates at record lows for the time being, we are seeing how tempting it is for people to purchase homes as quickly as possible.
We tend to see homebuyers purchasing homes now to cash in on low interest rates, while others are stretching their budgets to purchase a far more expensive home with the hopes to increase the appreciation they could ash in on.
With that in mind, there is one aspect of purchasing a home that does come into play, an outcome, which is not so desirable for homebuyers, and that is a bidding war.
In some parts of Canada, houses are still going above the asking price; a new survey from BMO Bank of Montreal reveals that nearly one in five Canadians have been caught in a bidding way during the home buying process. The survey did also find that some homebuyers have come prepared to fight, with 58% building flexibility into their home buying budget.
The fact that homebuyers are now taking bidding wars seriously into consideration, shows that they are learning from the past few years and preparing a budget that allows them to spend a little bit extra, without stretching themselves too thin.
Buying a home can be among the most important purchase you can ever make, so it is crucial that we take the right approach when doing it. Planning out a budget is key, next is to stick to it. What you have to remember when purchasing a home is not to get caught up in finding the “perfect” home, and realize that in the long run, it is not worth over extending yourself financially if the end result has you struggling to make mortgage payments, never being able to actually enjoy the house.
What can I do during the process of purchasing a home to not over extend myself?
It is important that you stick to your goals and budget, and not listen to the lender. You should not be having someone telling you home much you can borrow; you need to figure out how much you can afford, and by that I do not mean the maximum amount. You want to leave yourself with plenty of room to play around with, and have the ability to live a lifestyle you can afford.
Creating a detailed household budget is important as it will be able to help you determine what you can afford.
You have to realize that if you cannot afford to put more than 5% down on a house, then it is not the right choice for you.
One of the best pieces of advice I have ever gotten when purchasing a home is that you should be stress testing your financial budget. This means that you should be taking your mortgage payments and increasing is to where you are paying a higher interest rate.
Plan for the unexpected, and be prepared for whatever comes your way. A interest rate hike will come in the near future, it is better your purchase a house that takes that into consideration so you can be able to live an affordable lifestyle, while enjoying your new home.
image source: james.thompson