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How Much Does Home Ownership Really Cost?
Many first time home buyers are so eager to join the home ownership club that they do not consider the true costs of home ownership. The cost of home ownership is more than just the amount you pay each month for your mortgage.
According to Brad Nemes of BradsMortgages.com, Most people just stop to consider their monthly mortgage payments. But there are other costs that are associated with home ownership. It is important for owners to factor in these costs when deciding what home they want to purchase.
How much will your new home cost you each month? What type of expenses should first time home owners consider when buying a home? There are quite a few things to consider.
* The 1/3 rule of thumb. To comfortably afford your home, your mortgage should not be more than 33% or one-third of your income. Some experts recommend keeping that amount to about 25%,
* Factor in incidental costs. In most cases, you will need money for a down payment. Depending upon the type of mortgage, you may need anywhere from 5 percent to 15 percent of the purchase price.
You will probably also need to pay for the home inspection. These inspections can run start about $300 and up. If you buy a rural property, also include a septic inspection for about the same cost or more.
* Closing costs. Closing costs will run anywhere from 1% to 2% of the cost of your home.
Depending on where you live, you may need to pay a transfer tax or a home occupancy tax. This can vary from several hundred dollars to several thousand dollars depending on your community.
* Home Owner Association fees.
If you are purchasing a condominium, you may need to pay condominium fees. In some areas, home owners must pay a home owner association fees each month.
* Incidental fees.
Most homeowners want to paint or buy new curtains for their home. Some homeowners may go a little bit further, and they may decide to put down new flooring or purchase furniture. Remember to include these fees in your budget.
* Ongoing expenses.
There are other expenses including home maintenance expenses and taxes to consider. Also, you should consider the costs of utilities too. The bigger the house, the greater the costs. A larger home will cost more to heat or to cool than a smaller house.
* Changes in interest rates.
Right now, interest rates are at an all-time low. Depending upon your mortgage, your interest rates may not stay the same for the life of your mortgage. When interest rates rise, your mortgage rates will also rise. You should factor this into your budget when deciding if you can afford a home.
* Insurance fees.
You will also need homeowners insurance to cover your property in the case of some events. Depending on where you live, you may also need to purchase a specialized type of home owners insurance. For example, you may need to purchase flood insurance or hurricane insurance in addition to your regular insurance policy.
Insurance policies must be paid to take effect when you move into your new home. If you are building a home, you will need insurance even if you just have a lot.
Many experts also recommend having a savings account for emergencies or other expenses that may arise. According to Brad, It is important not to cut yourself short. You want a financial cushion available just in case of an emergency. For example, if your air conditioning system or furnace should go out, you will need the money to fix the problem. According to Brad, you should set aside $200 each month to build a financial cushion. This cushion can be used for emergencies or routine maintenance.
All of these expenses may seem a little bit overwhelming, especially if you have never owned a home before. One good way to get used to paying a mortgage and expenses is to start putting aside the difference between your rent and your mortgage in a savings account.
If you are paying $1000 for rent and you are looking at a $2000 mortgage payment, put the $1000 difference in a savings account. Not only will you get used to carrying the larger mortgage, but you will also be putting money aside to pay for incidental moving expenses.
Says one prospective homeowner, I was worried when we decided to buy our first home. But because we had been putting money aside each month, we knew that we could afford the higher monthly payment. Instead of panicking, we knew we would be okay.
Top five home renovations that increase property value
Looking to increase your homes property value? Here are five of the best renovations you can do to your home to increase property value. These five renovations can sometimes have a return on investment 5-6x what they cost.
Flooring is one of the most important aspects of your house. You will see an immediate rise in property valuation with the installation of hardwood floors. Existing hardwood floors that you can refinish are ideal as they are less costly to restore and in higher demand than new flooring materials. For the bathroom, tile will always be in demand and retain value exceptionally well.
Kitchens often look tired and dated, in large part due to old fixtures. Replacing or updating cabinet hardware, light fixtures, countertops and faucets will result in an immediate increase in your homes value. This small, but effective upgrade will also revitalize the entire home. Pot lights are in high demand in open concept style homes.
Thebathroomis the second most important room in the home in terms of valuation. If you can add a three-piece bathroom to a home with only one full bathroom, you will see a dramatic rise in the market value of your home. While you should never compromise bedroom space for a bathroom, try sneaking one in dead space in the home. Scott managed to fit in a 3-piece bathroom under a staircase the width of the room measured just 44 inches. As an added tip, use glass for the shower to make the bathroom feel more spacious.
Kitchens are the single most important room in the home relating to valuation. The kitchen can make a significant difference in the value of your home. As such, it is crucial that you invest in having a modern, fresh anddesirable kitchen. Modern cabinetry, under cabinet lighting and new appliances will all significantly increase the value of your home on the market. To save on cost without compromising construction and desirability, look at options like Ikea cabinets as opposed to custom cabinetry.
#1 An Income Suite
No surprise, but the single biggest way to increase the value of your home is to build an income suite within the property. Whether this is converting yourbasement into a rental, or another floor in the home, an income property will increase your homes worth. The main reason for this is that it covers a portion, or sometimes all of your mortgage payments, and results in your home being cash flow positive which creates real wealth that can supplement your income.
Valuable Fraud Prevention Tips for Homebuyers and Homeowners: Part 1
March is Fraud Prevention Month. Canada Mortgage and Housing Corporation (CMHC) has consistently been a leader in the fight against mortgage fraud and offers the following tips to protect yourself against becoming a victim of mortgage fraud.
Misrepresentation of Information
Mortgage fraudoccurs when someone deliberately misrepresents information in order to obtain mortgage financing that would not have been granted if the truth had been known. This can include:
Misstating ones position or inflating ones income or length of service at their job;
Misstating employment status (ie. salaried/full time versus contract, part time, hourly or commission-based or self-employed);
Misrepresenting the amount and/or source of the down payment;
Purchasing a rental property and misrepresenting it as owner-occupied;
Not disclosing existing mortgage and/or debt obligations;
Misrepresenting property details or omitting information in order to Inflate the property value;
Adding co-borrowers who will not be residing in the home and do not intend to take responsibility for the mortgage.
Another common form of fraud is when a con artist convinces someone with good credit to act as astraw buyer.A straw buyer is someone who agrees to put his or her name on a mortgage application on behalf of another person. In return for their participation, straw buyers may be offered cash or promised high returns when the property is sold. Often, straw buyers are deceived into believing that they will not be responsible for the mortgage payments.
Consequences of Misrepresentation
Borrowers who misrepresent information and straw buyers who allow a property to be purchased in their name are committing mortgage fraud and will be responsible for any financial shortfall in the event of default. They may also be held criminally responsible for their misrepresentation.
If you suspect that you or someone you know has been the victim of mortgage fraud, please contact your local police department or The Canadian Anti-Fraud Centre.
Toll Free: 1-888-495-8501
Toll Free Fax: 1-888-654-9426
To find out more about mortgage fraud, visit the fraud prevention section of the Canadian Association of Accredited Mortgage Professionals (CAAMP) website athttp://mortgageconsumer.org/protect-yourself-from-real-estate-fraud.
For over 65 years, Canada Mortgage and Housing Corporation (CMHC) has been Canadas national housing agency, and a source of objective, reliable housing information.