Buying your first home in Toronto – or anywhere for that matter, requires you to have a sizeable down payment as well as money for the closing costs, which can run into several thousands of dollars and for which many first-time buyers are unprepared. The best way to find money for your downpayment is to put together a proper budget that will take into account all of your fixed and variable expenses and to live according to that budget for several months prior to starting your home search.
The very first thing you must do when setting out to make a budget is to track your monthly expenses for a good three months in order to establish your spending patterns so that you have an accurate snapshot of your monthly expenses. Once you have a good idea of how much you spend for your variable expenses, then you will be ready to sit down to create your home buying budget.
The secret to budgeting is to be as realistic as possible. Here is a breakdown of the major categories you must include in your budget breakdown:
Total monthly income (Net, from all sources including any government assistance)
Rent (Mortgage & property tax)
Gas & Water
Repairs (car maintenance)
Debt repayment (credit cards, line of credit, etc…)
In the end, your total monthly expenses must be lower than your monthly income. If it isn’t, then you have to adjust to ensure that it is. Next, you should adjust your current rent/housing allotment to include what you would expect to pay if you bought a house in the price range you are targeting. Remember that you should factor in whatever taxes you will anticipate paying for the house. You should also then adjust your electricity and other fixed expenses to reflect what the higher costs would be for the house. The difference in cost you should put aside in a savings account for your down payment.
By doing this, you will get used to living with the costs of what you can expect the costs to be when owning your own home while also saving towards that eventual goal.