Saving More vs. Buying Now

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Congratulations! You’ve worked hard and saved enough for the required 5% down payment on your first house. You have a decision to make as you prepare to open the champagne: should I buy now or save more money for a greater down payment?

When looking for a home, the size of your down payment is crucial since it affects your purchase price and monthly budget as well as your ability to avoid paying thousands of dollars in interest. Homebuyers must also decide if they want to save enough money to avoid having to pay mortgage default insurance, which is required for purchases with less than 20% down.

We’re here to outline the distinctions between using your savings as a down payment and saving for a larger down payment.

Putting More Toward a Down Payment

It’s worth thinking about if you can save more money each month and put down a bigger down payment in a few years. Putting more money down will not only lower your monthly principle and interest payment, but it will also result in interest savings of thousands of dollars over the course of your mortgage.

You’ll also be eligible for a traditional mortgage and be able to avoid expensive mortgage default insurance if you put at least 20% down. Since you pose less of a default risk by making a significant down payment, lenders are likely to offer you cheaper interest rates.

A bigger down payment is a decent first step if all you can afford is a tiny one-bedroom condo but you’d rather purchase a detached house. A bigger down payment also acts as a safety net in the event of a housing correction.

For instance, if your home’s current valuation is $950,000 and there is a 15% housing correction, your home would be worth only $807,500. You would still have $47,500 in equity with a down payment of $190,000 (20%) ($807,500 – $760,000 = $47,000). However, your mortgage would be $95,000 underwater if you just put down 5% of the purchase price, or $47,500 ($807,500 – $902,500 = -$95,000.)

Purchase Now

Saving more money for a down payment might seem like a smart idea, but not everyone can do it. Start by looking at your monthly spending plan. How much money can you put aside each month, and when will you be able to accomplish your new savings target? You could invest $6,000 a year toward your down payment, for instance, if you can save an extra $500 per month.

Being priced out of the market (occurs when home prices increase faster than your down payment) is a serious problem in more expensive areas like Toronto and Vancouver. For instance, if home prices increase by 10% next year and you’re pre-qualified for a $950,000 house, you’ll need to save at least $95,000 to be able to purchase the same home. Can you actually do that?

Are you truly willing to forego your daily excursions to Starbucks and yearly trips to Mexico in order to save more money for a larger down payment? However, purchasing now makes sense if your lender offers reasonable prepayment options. If you receive a raise at work or receive additional income, you may always make lump sum payments or increase your mortgage payments.

Which one suits you better?

Moving In Together?

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You feel that your relationship has progressed to the point where moving into your first apartment together is the only logical next step after contemplating the notion in your thoughts for a long.

Be sure to take into account these 5 suggestions to assist you get ready for living with your significant other before you even begin house hunting.

You should be transparent about your finances.

When you decide to live together, you both share the cost of maintaining your home on a regular basis, in addition to paying for utilities, groceries, and all the other delightful things that come with renting or purchasing a property.

However, if you are concerned that your partner will find out how much money you make, avoid moving in with them (or how much money you spend). Being able to handle your personal financial responsibilities is crucial when beginning your lives together because financial stress may be a significant factor in people separating.

Do you wish to divide the proceeds equally? according to income? combining all funds into a single account?

Before you put your signature on the dotted line, you should think about and agree on these financial aspects of living together.

Decide on your decorating scheme thoroughly.

This entails sitting down and debating what items from your current possessions stay and what don’t, as well as choosing the general look and feel of your new home together.

During this time, be respectful of one another’s needs and work to come up with compromises that will work for both of you. When it comes to contrasting tastes, it’s crucial to maintain an open line of communication without becoming irritated or upset. Remember that sometimes compromise is necessary for all of us.

Distribute household duties fairly, and don’t give up if they aren’t completed right away.

It is essential that the two of you divide up all the domestic duties as equitably as possible when you first move in together. There will be moments when it appears like you are doing all the effort, even if you uphold your half of the contract. To aid in keeping track of daily and weekly duties, it is essential to keep a dry-erase board on the refrigerator. Change up the duties such that one week you take out the garbage and the next week they take care of the dishes. If the chores still need to be done, have patience. Simply because you can’t see something doesn’t mean it isn’t happening.

You’ll need time away from home and your own place.

You must therefore appreciate your partner’s demand for personal time away from you. Though first thrilling, living under one roof with someone else will eventually make you want to leave. Find a private space in your new house where you may go for some alone time. Without your partner, go to the movies with your friends. Go to the gym and yoga. Don’t let the fact that you are housed stop you from continuing to engage in your favourite hobbies or social gatherings.

Also, it’s true that living together makes a couple’s heart grow fonder while they are apart.

Invest time in one another.

Now that you are a couple, it is equally crucial to continue doing things together that strengthen your relationship in addition to enjoying your favourite things alone. Now that you can work together on enjoyable household tasks like gardening, cooking, and entertaining. Make time for one another to avoid becoming stuck in the daily rut. Make time for a “Date Night” so that you may both escape the pressures of daily life and simply enjoy being with your loved one.

Your relationship is taking a major step when you move in together. Remember to always keep the lines of communication with your partner open and follow these 5 simple tips to better prepare you for the move ahead!