Whether you’re buying your first home, or an investment property in Vancouver, budgeting for a mortgage is crucial. Many buyers, especially first-time homebuyers, avoid this crucial step. There are many reasons you might be nervous to break down the numbers and take a look at your budget, whether it’s a lack of financial know-how, or reluctance to set limits on your spending. However, budgeting for a mortgage is an invaluable step in gaining long-term security, and ultimately, your dream home.
Although setting a budget may force you to tighten your belt in the short-term, you will experience the long-term benefits of financial freedom, and paying off your mortgage faster. Outlining a clear and accurate budget can help you to consciously make or break habits that will save you money, getting you moved in all the sooner. In many cases, taking the first step to establish a budget is the hardest part. Here are some simple steps to get started in tracking your spending and building savings for a mortgage.
1. Understand where your money goes
With so many of our daily purchases being made with debit or credit cards, finding records of where your money goes has never been easier. To start, take a look at your bank statements; at the very least, you should be looking at the last six months of your spending. The farther back you analyze your spending, the more accurate your budget will be for the coming months or years. Take note of recurring purchases, such as bills, groceries, and car payments. Combine this daily spending with larger one-time purchases, such as vehicle repairs and program enrollments. Although these larger purchases are less predictable, patterns often emerge given enough time.
2. Compare your spending to your income
When you have a comprehensive list of your spending for the last six to twelve months, compare it to your household’s annual income. If you’re making more money in this period than you’re spending, great! From there, consider saving for your mortgage to be just another expense, just as you would for your weekly grocery shop. Calculate the maximum amount you can comfortably contribute to your mortgage fund and stick to it as much as possible. Budgeting requires a lot of discipline, and the more consistent you are about your saving, the sooner you’ll be moving into your new home.
3. Find ways to maximize your savings
If you’ve crunched the numbers, and your maximum monthly savings won’t be enough to get a mortgage on your timeline, it’s time to make some changes. This is one of the hardest parts of setting a budget: identifying places where you can cut back or minimize costs in your day-to-day spending. Whether it’s the price of fueling more than one vehicle, paying for parking, or your weekly lunch on the town, there are probably places in your spending habits that can be improved to help you meet your financial goals. At the same time, make changes that are meaningful to your net income. The thirty-cent
difference between red and green grapes will probably not factor heavily into your ability to save for a mortgage. Negotiate your phone, utility, or credit card bills, consider taking public transit to work, make lunch and coffee at home rather than eating out. With enough time and discipline in changing these habits, you will notice more and more money left over at the end of the month. Resist the urge to splurge and do your future self a favour by saving it.
4. Change your perspective on spending
Many view their spending as a matter of expenditure – whether they can afford it or not. However, the truth is, every purchase is a trade-off. Whether you’re exchanging money for time or comfort, make sure that every purchase is justified, and remember your long-term goal of debt-free homeownership. Most financial experts agree that spending wisely is far more important to wealth accumulation than employment income. In other words, when it comes to accumulating savings for a mortgage, the change starts with you.
If you have any questions about budgeting for a mortgage, or if you’re looking for a mortgage approval, contact Milka Lukacevic, your trusted Port Coquitlam Mortgage Broker today.