Creating a Monthly Homeowner’s Budget

One of the most important things for first-time homebuyers is knowing how much you can afford. This is done by creating a homeowner’s budget. When planning this budget, you need to think about everything that you spend in a month. Leave no stone unturned and make sure that it is all accounted for.

When creating a homeowner’s budget, it is important to think like an accountant. It may surprise you to find the little habits that are actually costing you several hundred dollars each month. If you use spreadsheets for your budgeting, this is the perfect opportunity to tweak and perfect them.

Set Your Homeowner’s Budget by Knowing What You Spend

There are different ways to find out what you are already spending. There are some ways that are faster and easier than others, but they are similar in most ways. Here are some of the best options for finding out what you are spending while determining your homeowner’s budget:

  • Get transaction records through online banking – All of the major banks in Canada now have online banking systems. When you log in, you can pull your transaction record going back several months all the way up to a year. Pull as much information as you can so that you can form an accurate homeowner’s budget.
  • Find bank statements with history of transactions – If you still use paper bank statements, try to find statements from the last two or three months. The same goes for your credit card statements. Accuracy is the name of the game.
  • Receipts – If all else fails, receipts will work just fine. This method is less accurate, however, and will take far longer. This is the least preferred way of finding out what you are spending to create your homeowner’s budget.

When you have established your history of spending, separate them. Group your transactions by month and by the type of expense. By breaking down your monthly spending, you see patterns established.

Example of Monthly Expenses

Type of expenseJuneJulyAugAverage
Monthly Rent$1,000$1,000$1,000$1,000
Student Loans$500$500$500$500
Car Payments$900$900$900$900
Fuel Purchases$150$200$145$165
Eating Out$100$200$145$148

In the example above, we see that $296 is being spent monthly on eating out and various merchandise. We can also see that the car payments are a significant amount every month. If you feel like you’re tight on money when creating a homeowner’s budget, consider eating out less or buying less merchandise. You can even consider getting rid of a car to find a less expensive option.

Monthly Budget Considerations for Creating a Homeowner’s Budget

When you set out to buy a home, you will need money to start. This is because there will be out of pocket expenses to keep in mind. Even after you have moved in, there will be new, recurring expenses. This is how you create an effective homeowner’s budget.

Property tax is one of the things to consider. You can find last year’s property tax on an MLS listing for a home that you are considering. Divide that number by 12 and add that number to your monthly homeowner’s budget. If tax last year was $1,940, for example, you can add about $160 to your monthly homeowner’s budget.

You can request that your realtor obtain for you the monthly bills that were being paid on the property in the months prior to your visit. You will also have to budget for homeowner’s insurance, electric, gas, waste, sewage, and (in most cases) water.

Repairs and Fix Ups

Another cost that many new buyers tend to not consider in their homeowner’s budget is any repairs or fix ups that are necessary. On average, a home will require an investment of around one percent of the property’s value in terms of upkeep and maintenance.

When moving in, take another one percent of the home value into your budget. This will cover things like painting, new valves, window cleaning, fireplace cleaning, landscaping, and any other minor work that you feel needs to be done to the home.

Fix ups might seem like a huge expense now, but some can actually recover their costs over time. This can be achieved through replacing old windows, painting trims, repairing or patching cracks on the exterior, installing a furnace, insulating the basement, etc. These are all fix ups that improve the efficiency of your home, resulting in lower energy bills.

Other Fees to Consider for your Homeowner’s Budget

When you are calculating your total homeowner’s budget, keep in mind that the real estate agent and mortgage broker fees won’t be out of pocket. Those fees will instead be covered by the price of the home and the mortgage, respectively.

The fees to have your home appraised or inspected, however, will come out of pocket. For home inspections, count on around $100-$200 per hour with the average inspection taking two or three hours.

When it comes to home appraisal fees, this is relevant if you are applying for a variable rate mortgage or are planning to use the property as a rental unit. Appraisals can cost around $190-$300, depending on the extent of the appraisal.

There are other inspections to be aware of as well. This depends on the age of the home or any specific concerns that you might have. This includes inspections by a foundation specialist, a plumber, an electrician, a roofer, or a pest inspector. These inspectors will provide you with an estimate so that you can properly adjust your homeowner’s budget.

Contacting a Lawyer

When your mortgage is firm and all of the pages of the contract have been signed, it is time to contact a lawyer. Their fees can vary, so get quotes before making a decision. Their fees depend on the number of disbursements on your contract. Disbursements are the fees that your solicitor will have to pay to third parties on your behalf.

This can all sound overwhelming at first glance. Take a deep breath and open up a spreadsheet. With some careful planning and foresight, you can save some stress when it comes to mapping out your homeowner’s budget.

Financial experts recommend having an emergency fund saved up as well. This should cover around three months of expenses should unforeseen circumstances arise. You may also want to consider a low-rate line of credit – something near the prime rate – attached to your home for expenses as well.

Establishing a homeowner’s budget doesn’t have to be as complicated as it may seem. There are helpful guides out there that can get your budget in place so that you know what you can afford in a home.

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