Real Estate in Edmonton: What Can You Afford?

Real Estate in Edmonton: What Can You Afford?

Before you start surfing through MLS listings and envisioning the white picket fence, you have to make a budget. Jumping into a house without sorting out your financial situation is not a smart idea and could lead to a catastrophe down the road. Preparing a budget can be a scary thought for most of us (especially when confronted with credit reports and monthly expenses) but it is a necessary task when deciding to purchase real estate in Edmonton or anywhere across Canada. House prices have fluctuated so much in the past decade that people are flailing when in comes time to pay for their homes; taking this first step will help ensure that you are not one of those people.

First, take a look at what you can allocate to your house purchase. To do this you will have to think ahead to the tow main categories of expenses: Mortgage Payments (including principal, interest and insurance) and Living Expenses. To get to these two figures, you first have to lay out all of your current finances and work from there.
• What is your credit card debt?
• What are your current loan debts (if any)?
• What are your current monthly living expenses?
• How much monthly income is coming into the household? (Don’t forget to factor in any known income changes that are coming down the line.)
• What are your current savings?

After adding (and subtracting) all of the involved figures, you should have a monthly figure that roughly represents your net worth – a figure that represents how much money you have to play with when looking at the costs of purchasing a home.

Once you have that figure, your financial provider, or lender will give you a house budget – this number will be your maximum purchase price. Your maximum price is usually higher than the price you will be able to afford down the road a few years. There are other costs to factor in. Experienced Edmonton Real Estate Agents and financial advisors will be able to help you with your budgeting.

Typical One Time Fees can include:
• A property inspection for your new home
• Legal fees, property survey fees and land transfer fees
• Mortgage application and appraisal fees
• Moving and/or packing expenses

It should be noted in some situations, fees can be negotiated or subtracted from the purchase price of the home. This is something to discuss with your realtor.

Projected Monthly Expenses can include:
• Property taxes
• Utilities
• Homeowners Association Fees (may not apply)
• Community League fees (optional)
• RRSP / savings payment plans
• Debt payments
• Living expenses* (food, childcare, entertainment, sports, clothing, gifts, etc.)
• Miscellaneous* (medical costs, etc.)

*In order to calculate estimated living expenses and miscellaneous costs, you will have to collect receipts for the previous year and use those figures, realizing that expenses will not be exactly the same from year to year.

After adding all of your monthly costs up, you will be able to come up with a definitive monthly mortgage payment and amortization rate that will determine what your maximum house price really should be. Remember to factor in the cost of rising property taxes and possible home renovations due to the age of the house (roofs, furnaces, hot water tanks: all of these things are costs that need to think about.)

Here are two final pieces of information that may help you with your budgeting:
It is recommended by the Canada Mortgage and housing Corporation (CMHC.ca) that your monthly house payments (including mortgage, taxes and utilities) should not exceed 30% of your gross household income.

With all of these budgeting tips, you will be able to find your affordable Edmonton property and live happily ever after.