Many homebuyers need to save money if they’re going to purchase a property, but lots of people don’t know how much they need to put away.
The simple truth is that you need to save as much money as you can. Why? Because then you can borrow less and pay off your mortgage sooner or more comfortably.
However, the reality isn’t quite so simple.
We’ve looked at three issues that you need to consider when establishing how much you have to save to purchase a property.
Review them and use the advice to find the level of savings that works for you.
Decide what you property want to buy
The first thing you need to do to know how much you need to save to purchase a property is to decide what sort of home you want to purchase.
You can’t begin to get an idea of how much you need to save if you don’t know what you’re saving for.
As an example, a one-bedroom apartment in the center of Toronto may cost the same as a log cabin in Orillia, while the average property price in Vancouver is 5 times the amount of one in Fredericton.
Then there’s the condition of the property to consider. The reason for this is that a fixer-upper home will cost less upfront than a home that doesn’t require work on it.
So, think about what you want and where you want to live. Once you have these baselines set you can then see how much a bank will lend you.
Learn how much you can borrow
As soon as you know what type of property you want then you can find out what finances you need to be able to afford it.
This is crucial because almost no-one has the sort of disposable cash you need to buy a property outright. The reality is that you won’t be able to buy a home without a loan, you should get in touch with a regional mortgage broker who understands the market. For instance, if you want to buy that log cabin, look for an Orillia mortgage broker.
By checking in with a site like Breezeful you can learn how much you can borrow. You can test out different savings amounts, so you’ll get a clear indication of much you need to save.
So, find out how much you can borrow and test the deposit amounts to get an idea of the amount of money you actually need to save to buy your home.
Research what deposit amount is best for you
Many people want to buy a property as quickly as possible. And this makes sense. If you’re aching to get on the ladder or move up a step then you don’t want to hang around.
However, you really should think about your long-term plans. Why? Because you shouldn’t just be thinking in terms of saving the least amount of money you can, you should be operating on the principle of saving the level of cash.
For instance, the Prime Minister announced incentives to first-time buyers in the form of a shared mortgage equity of 5% of the purchase of an existing home.
It’s great for some people but you must keep in mind that if your deposit is less than 20% then you’ll also need to take out mortgage loan insurance.
So, do your research on the pros and cons of the different levels and schemes of deposit you can put down to buy your home.
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Deciding what home you want to buy, learning how much you can borrow, and researching what type of deposit is best for you will give you a clear indication of how much you need to save to purchase a property.
But the key thing to all of this is to save the amount that works for you.
There’s simply no sense in driving yourself into the ground by trying to save for a higher deposit amount just to avoid additional costs.
Because doing this will impact on your mental health and could impact on your personal and professional relationships.
So, work out what deposit amount you can get to healthily and then start saving!