While COVID-19 pushes Canada into a recession, home shoppers should rejoice. You read that right. Ignore the naysayers, because buying opportunities exist in every market, even during a global pandemic.
Now could be the perfect time to buy a home!
When you hear about rising home costs on the nightly news, remember they’re talking about the overall market. Individual neighbourhoods still buck the national trends. And motivated sellers always are open to leaving money on the table.
For most Canadians, a personal home accounts for most of their wealth. The process of buying a home needs to be taken with care, especially if you are a first-time home buyer. Buying a home to keep up with the Jones’ is not a smart strategy; however, if you intend to grow, then the pursuit of home ownership is beneficial.
Several years ago, Thomas decided that he would buy his very first home. With the help of CleveDoesMore, his family made a financial plan, budgeted wisely, and saved enough money for a down payment. Despite the unexpected COVID-19 pandemic, the time seemed right for Thomas to become a homeowner.
He wanted to be smart about it, though, and not allow his family to lose money while the bank increased its bottom line at their expense. After discussing his concerns and opportunities with CleveDoesMore, Thomas realized that he could successfully buy a home and avoid some common mistakes often first-time home buyers face and cost big money.
Here are five ways homeowners tend to lose money:
Buying in the wrong location
Buying in the wrong location and at the wrong time could cost you dearly. You may have heard the saying “Location, Location, Location” as the key to buying real estate. What does this really mean? Imagine a farmer seeking fertile ground to plant seeds. The farmer needs to understand what makes a location fertile or futile.
Home buyers need to understand that location makes homes appreciate in value. If you pay $1,000 in closing costs and interest to the bank, your home should gain more than $1,000 in value.
Paying more than the property is worth
Paying more than a property is worth is another mistake that can help the bank but hurt you. The emotional surge you feel when you see that home you love can quickly cause you to pay more than it is worth. Fortunately, real estate can be forgiving and over time you may get back on top.
Be careful, though. Falling in love with a house could set you back and you may end up paying more interest to the bank than you should.
Focus on rates but miss the terms
Falling for low payment options while not understanding interests and costs is another pitfall to avoid. The concept is the same as the credit card offers you get in the mail promising 0% interest for 6 months. At the 7-month mark, a ridiculous interest rate kicks in and you’re stuck with a high balance.
Sometimes low monthly mortgage payment options include unusually high interest. Your monthly payment is low, but a high percentage of the payment is interest. Over time, you pay more interest than you might with a higher monthly payment.
The overall mortgage cost-benefit of the mortgage should be reviewed and often you need a professional to help you understand the complex jargon.
Not understanding prepayment options
You need to understand prepayment options and amortization in order to plan how to pay your loan off early. Amortization is the length of time it takes to pay off the mortgage. If your initial amortization is 25 years, a few extra payments a year can significantly reduce this time and the overall interest cost.
Switching homes too frequently
Endless amortization by perpetually changing homes without a sound economic strategy steals away your equity. Buying and selling real estate comes with significant costs. The decision to switch homes is music to a banker’s ears because they stay in your pocket much longer. If your home is appreciating well, stay put, or consider refinancing if you really need to pull equity out.
Did You Know?
While the above are general guidelines to avoid losing money as a homeowner, there is nothing that replaces getting help from a trusted professional like CleveDoesMore. One thing that Thomas learned was that it makes no sense to be house rich but cash poor.
Another great benefit Thomas received during his financial consultation was locating money his family didn’t even know they had! The CleveDoesMore $500 Fix is a time tested program that has helped Thomas and many other people like him find money. Getting started is easy, and it is backed by a full guarantee.