Photo: Mark Hillary
As you look around the latest homes for sale in your neighbourhood or in a desirable town, you realised how badly you want to move. However, moving to a new house is not all about desire. You also need to be able to afford it. Carefully reviewing your financial situation will help you determine if this move is smart or even possible. Will you need a new mortgage for a new house? Can you afford it? How much will you be paying?
Aside from this, here are 5 things to consider that will help you decide if you can really afford to move to a new house:
Equity in Your Home
If you have equity in your home, you’ll tend to have an easier time with this buying and selling process. If you have equity in your home, then you can likely obtain more money for the house than you purchased it for. This is the goal of any sale to ensure that you are not underwater when you sell the house. Additionally, you have to consider how much equity you have. In the event that you make only a few thousand dollars and do not have any more money saved, you likely cannot afford the move right now.
Your Available Deposit
Calculating the exact down payment as deposit for the new house can be difficult especially if have not yet close the deal of your current house. Using a mortgage calculator, such as Clydedale Bank’s will help you assess the situation and put it in the right perspective. The amount you can afford will depend on the price of the house you want to buy. Having enough money saved up is important, and the less you need to make from the sale to afford the move, the better shape you are in.
Having enough stowed away for a deposit is not enough. You also need to factor in the other fees you will need to pay when moving. Working with a professional in the field, such as an accountant or a certified financial planner, can help you gain a better scope of your situation. Using a mortgage calculator to compute the expected monthly payment will help you determine if moving to a new house is advisable at this time. You also want to speak to an estate agent to understand how much money you should save to cover their fees, legal fees, stamp duty, etc.
Other Financial Factors
Even if you feel that you are financially stable enough to move, there are other financial factors to consider. Be sure to stay up-to-date on your credit scores. The better your credit scores are, the more likely you are to get approved for a loan that you want/need. You also need to consider if you've ever missed any payments on your current mortgage. If you have, you could be considered major risk to the lender.
Have Money in Reserve
Let's say that you have enough money for the down payment, closing costs and any other fees, but you don’t have anything left after you pay for all of that. Starting off a new home ownership experience with no money in your bank account is not a wise financial decision. Getting back on your feet can be extremely difficult. Expect to have at least 3-months’ worth of expenses in your account. Some sources will say you should have even more in case of emergencies.
Considering all these factors will help determine if you can take the leap and buy that new home.