Although we made sure to prepare ourselves for this significant step by getting our finances in order, unexpected and hidden costs are always a possibility when buying a home. Here are the three financial realities I learned from buying my duplex to help you prepare for purchasing your own.
Prepare yourself financially for a first-time purchase
For the past five years, I planned for my first purchase by prioritizing my financial health. After putting a budget in place and paying off all my debt, I wanted to make this project happen quickly so I buckled down and started saving in earnest.
To learn about the costs of purchasing a property, I had to do some homework. I asked experts at financial institutions and did my own research on the web. Doing all this helped me learn that I’d need between 5% and 20% of the property price for the down payment and an extra 2% to 5% to cover the acquisition costs. Doing my research wound up being extremely helpful. Despite that, reality can still catch you off guard sometimes!
1 – A larger down payment isn’t necessarily better
From everything I had read in articles and from what others had told me, I always assumed that the larger the down payment, the greater my chances of mortgage approval were. But I was surprised to learn that if I was planning on living in the property, even having just a 5% down payment was adequate to secure the loan. In fact, it was recommended that I lower my offer — a sensible choice given the low mortgage rates at the time of my purchase.
This way, it would have been possible for me to advance the purchase date with a down payment of 5% of the property’s price. Things are always subject to change in an extremely active real estate market.
2- It’s better to plan ahead than to not have enough to cover the basics
A second financial reality I learned is that having a comfortable financial safety net is a must. This will help you cover acquisition costs like notary fees, property transfer duties, home inspection costs, and more. Saving more than I needed ahead of time helped lift some of the weight off my shoulders. In my opinion, making this process as painless as possible and avoiding any additional sources is necessary because you’ll no doubt be confronted with new information along the way. More than anything, you want to be prepared. Buying a home is an important moment in your life and should be enjoyed under the best possible circumstances.
I saved up about 5% of the total sale value so that when it came time for any other transactions, I could rely on these savings. This way, when invoices or payments went higher than what I estimated, I was able to cover the costs. Having some financial security gave me much-needed peace of mind.
3 – Having an emergency fund from the outset is essential
It’s inevitable: going from renting to owning a duplex will undoubtedly come with its share of unplanned costs. No matter how planning ahead you do, it’s likely that extra expenses are going to surprise you. That’s why it’s always wise to set aside a rainy day fund to cover minor repairs or rental housing tribunal costs. To give you an idea, financial experts recommend setting aside the equivalent of at least 1% to 2% of the property’s total value every year.
Something else to keep in mind: Home inspectors that in the first year of purchase, you should invest 3% of the purchase value in maintenance and repairs to maintain or improve the building’s condition.
Overall, I’m pretty careful when it comes to personal finances. Luckily, most of my expenses related to the purchase of the duplex arose in the first month of purchase.
Financial prep = peace of mind
As you can see, purchasing our duplex brought on some new financial realities. Even though I did my best to prepare myself financially, surprise expenses are to be expected. But with the right advice and saving up beforehand, I was able to make the process of buying my duplex as smooth as possible.
Source: moncoindevie.com
