Posted on Wednesday February 19, 2025

Home ownership: Adjusting your mortgage budget

Would you like to become a homeowner now, but without having to tighten your belt too much? A sound financial plan for this important purchase will put your mind at rest. In addition to mortgage payments, there are a host of other costs to consider when you become a homeowner. Can you easily fit them into your budget? Find out about the main costs you need to factor into your planning now.

A budget ready for a mortgage

To become a homeowner, you must first be able to obtain a mortgage. Most lenders will not let you choose a property that takes up more than 32% of your income. That is a good thing, because there are other costs involved

Your mortgage budget will therefore vary according to your income, in addition to other factors such as the interest rate. For example, with a gross income of $60,000, a family would be able to spend around $1,600 a month on housing (32%). To find out whether loan repayments and other expenses will allow you to live well, develop a complete budget and establish your borrowing capacity. Use the UNI calculator to find out which house you can afford.

Does your budget seem insufficient? To help people whose total household income is less than $40,000, the provincial government has set up the Homeownership Assistance Program. There are also a multitude of measures available from all levels of government to support people wanting to become homeowners.

How much to save before buying your first home

Your down payment must be at least 5% of the purchase price . If you set your sights on a home costing $365,000, you will need to budget $18,250. That is money you need to have accumulated before you buy. But that is not all! Start-up costs, also to be saved in advance, can amount to another 2% to 5% of the purchase price. The Home Buyers' Plan (HBP) and the tax-free savings account for first-time home buyers (FHSA) can help you accumulate the necessary amount.

Purchase-related costs (2% to 5%)

Once you have accumulated a down payment, you are not out of the woods yet. For example, to avoid unpleasant surprises, it is a good idea to have the property inspected. An expert will be able to summarize the condition of the property in terms that everyone can understand. This will help you identify any renovations that need to be carried out and any maintenance costs. You may also need a professional real estate appraisal and a surveyor to determine the property's boundaries.

To formalize the sale, you will need a lawyer, whose fees will range from $1,100 to $1,800. All property purchases also involve the payment of a land transfer tax and sales taxes in the case of a new construction. In addition, moving will entail certain costs, including truck rental and the purchase of new furniture.

Anticipating future expenses

In addition to monthly mortgage payments, you will need to protect your asset with home insurance. You will also have to pay for property taxes, electricity and garbage collection, among other things. Some of these expenses may already be part of your budget as a tenant, but they will probably be higher once you become a homeowner. Recently, a very strong real estate market in New Brunswick has resulted in steep tax increases for homeowners.

If you are buying a house, there are more elements to insure, and its larger size means higher heating costs. A condominium may be less expensive, but you will have to add condo fees to your budget.

Carl and Corinne's budget and mortgage

Carl and Corinne pay $1,300 in rent and save $1,200 per month. With home ownership, their mortgage budget will be around $1,900 per month plus taxes, utilities and insurance. They have $35,000 to cover their down payment and initial costs. For a $365,000 home, they anticipate these initial costs:

• Down payment: $18,250
• Inspection: $750
• Legal fees: $1,800
• Land transfer tax: $3,650
• Moving and furniture: $4,000
• Other expenses and emergency fund: $6,550

In short, the mortgage itself is just one of the expenses to consider when buying a property. To make sure you do not forget anything, do what Carl and Corinne did by finally making an appointment with their financial institution. In addition to a budget that makes sense, they now have a strategy that will enable them to free up additional funds!

Would you like to draw up a budget with a view to purchasing a property, or simply to get the new year off to a good start? Make an appointment with a UNI advisor. It is the best way to make informed decisions!