A home is one of the largest and most exciting purchases you\u2019ll likely ever make in your life. Whether you\u2019re a first-time buyer or planning your next move, learning how to budget for a new home can help you avoid costly surprises and reduce financial stress. This guide teaches you how to budget for a new home, hidden homeownership expenses to watch out for and tips to help you reach your goal.<\/p>
How much do you expect to pay for your new house? Research the cost of homes in the area you want to live in and determine how much you can realistically afford.<\/p>
Gather every piece of information you can on your current financial picture. Look at your savings, mandatory monthly expenses, discretionary spending, debts, investment accounts and more. Having a clear picture of these items allows you to create a realistic plan for how to budget for a new home.<\/p>
Add up all your income. Then, add up all your expenses. Subtract your total expenses from your total income. If the number is positive, congratulations \u2013 you\u2019re spending less than you make. If it\u2019s negative, you\u2019ll need to cut back on your spending in order to put money toward your home goal.<\/p>
If you end up with extra money in your budget, put it to work. Dedicate a certain amount toward saving for a home, while also building your emergency fund<\/a> and paying off any debts.<\/p> Choose which bank account you\u2019ll store your savings in every month until you can purchase your home. Here\u2019s where it becomes important to choose a savings account that earns interest, because this is free money going toward your goal of homeownership.<\/p> Depending on how far away you are from your goal of owning a house, you may want to consider an investment account instead so your cash can grow faster. Keep in mind that a savings account keeps your money liquid, while a (low-risk) investment account is still invested in the market, so this option is only ideal if you have a solid chunk of time to save before you plan to access the money.<\/p> If you have some time before you need to access your savings to buy your home, you may want to look into investing the funds in your RRSP. The government offers the Home Buyer\u2019s Plan, which allows you to withdraw from your RRSP<\/a> early without paying withholding tax, as long as you\u2019re using the funds to pay for your first home.<\/p>\n \n\n5. Pick an account<\/h4>