You are ready to buy your first home but are you financially ready? For many of us, buying a home is a daunting and often unattainable task. However, what you need is the financial information about the market, knowledge of what you can afford, and a budget plan.
What someone can afford will vary from person to person, however, here are key tips about budgeting when you are planning to buy a home in Trinidad and Tobago:
1. Start Getting an Idea of the Market
Buying your home will not be an immediate process. Therefore, you must get as much information on the market as possible. Look at listings in the areas you would like to live in and get an idea of the general cost. Through this research, you will also start to learn your priorities when it comes to buying a home.
For example, some people change their preference for the location after doing their research. Some may also factor in renovation costs to their overall budget and thus, reduce their expected budget for the house itself.
2. Solidify your Budget
Once you have made a decision to buy a home you will need to set a spending capacity and try to save as much as you can to make a significant downpayment. This also includes estimating your mortgage eligibility with various lenders.
Some housing administrations recommend the 28% rule, which indicates that a mortgage shouldn’t be more than 28% of an individual's gross income per month. Some extend this to as much as 31% but it is important that you also factor in any other debts you will have on a monthly basis.
Once you understand your spending threshold you can then know the exact amount you need to save over a specific period of time to make a notable downpayment and your monthly cost thereafter.
3. Consider Homeownership Expenses
The cost of a house is not limited to a mortgage. It also includes a variety of other costs that come along with owning a property in Trinidad and Tobago. Some of these costs that you need to consider are:
- House insurance or homeowners insurance
- Repairs or renovation costs
- Property tax
- Maintenance cost (for example, gardening and general property upkeep)
- Electricity and Water bills
These expenses are not often top of mind for new home buyers but these costs can add significantly to your monthly expenses. Thus, it is important to include these factors and your other expenses for a more precise and accurate figure that you can afford.
Bonus tip: some homeowners create completely different savings accounts for these expenses (i.e separate from their downpayment savings account). The idea is that when the time comes they have the money to afford their downpayment and can afford the other expenses when they move in, which gives some peace of mind.
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