We would all love to buy a nice big property with all the luxuries and amenities, but the fact of the matter is that many of us live on fixed income ETFs or have salaries that don't permit us to spend that much on a home. We must be realistic about our home budgeting and decide what our top dollar amount that we can pay will be and stick to it. Here are some tips, tricks, and warnings for figuring out what your maximum home budget should be and forcing yourself to stick to your decision once it's been made.
Most people, especially most first time home buyers, have no idea how much they can afford when they go to buy their first Toronto condo and often end up overreaching because they expect to be able to afford the same level of comfort they were used to from living with their parents. But home buying is a process. Nobody gets their dream home right away. They have to work up to it, gradually upgrading as their salaries increase and their savings accounts grow.
Your first instinct may be to use the maximum loan figure a bank is willing to lend you as your top dollar budget for a home, but this is a mistake. Banks are often willing to lend you more than you can afford to pay back, so choosing a property off the Toronto condo listings that is at the top of this price bracket can result in you struggling to meet your payments or ending up with no money left over in your monthly budget for savings or emergencies. This is not a healthy way to live.
When you're figuring out the top end of your budget use 30% of your monthly income as the maximum figure for your monthly mortgage payment on any home you choose off the Toronto MLS. Always use your current income. Never count on a promotion or raise, and never assume that the interest rate on a variable rate loan will drop within a few months. If anything, assume it will increase and prepare for that eventuality or you could end up losing the house.
Once you have decided on a maximum budget for your home purchase, you must stick to it. It doesn't matter if there's a house on the Toronto real estate listings that you love so much you're willing to blow your budget for it. Overextending on your budget is a recipe for getting into financial hot water in the next few months or years, so take pity on your future self and exercise restraint when you're shopping for your new home. If necessary, give a more responsible partner or family member veto power over your decision to buy a home.
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