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 concessions 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 up in a bidding war
- They want a home so badly that they pay more than they intended to
- They were taking advantage of low interest rates
- They overestimate their financial resources
Besides these reasons why people choose to spend more than they planned to, some situations result in people unintentionally overpaying:
- 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
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
You can take steps to avoid overspending on your new home. These steps include:
- Leaving some breathing room in your budget and sticking to it
- Having money set aside for emergencies
- Taking living expenses into account when determining your budget
- Seeking financial and legal guidance before buying a home
- 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 where you feel trapped. These measures can help you avoid the financial and emotional regret of buying a home you may not be able to afford comfortably.