Why deposits matter

Not saving enough for a home today can cost you more tomorrow. It’s not fun to think about losing out on this opportunity, but here’s what can happen:

• You may have to delay buying a home and be forced to rent longer.

• You could have to work more or draw from other funds (like retirement accounts).

• The seller may opt for another buyer who has a higher deposit.

• Prices may have already risen substantially, by the time you have actually saved enough.

• Home ownership is a way to build wealth. Postponing ownership, or foregoing it altogether, can greatly decrease your net worth in the long-run.
   

By saving for a home today, you make any one of these scenarios less likely. Having a plan means peace of mind; because, if you follow it, you’ll have the money to purchase your dream home.

But how much should you save for a down payment? The recommended rule of thumb is to save 25 percent and no less than 20 percent, which will cover the down payment and all other taxes and closing costs. Paying a higher deposit may cause the seller to give a better price, but putting down a large deposit isn’t always best. There are a couple of things to keep in mind.

First, don’t take the down payment from your emergency funds, as you may need to do emergency repairs on your newly-bought home (plumbing, leaking roofs, etc.). Second, if you can get a higher investment rate than your loan rate, it is smarter to make a smaller down payment, so you may put more of your money into an investment that gives you a higher return.

Be smart; that way, the next time you look at a home you just have to have, you can have it. Just think how wonderful that will feel. You’ll probably want to celebrate.

What kind of home is right for you?

Not all homes are created equal. So, when you’re thinking about   the place you want to raise a family, retire to, or transform as a rental for tenants, you need to know the strengths from the weaknesses.

• New development: These   have just been built, which means that they’re likely made from stronger, better materials, they’re clean, and they’ll require little maintenance to start. What’s the disadvantage? These are almost always the most expensive option.

• Older Home: Older homes can be more complicated. They’ve survived families before you, which is a good sign. They’re not as expensive as new developments, but they’re also likely to have more issues. It’s very important that, before you buy, you have the place examined by experts, like plumbers, electricians, and structural engineers, to make sure everything is still intact.

• Strata: Commonly known as apartment complexes or townhouses, buying or renting strata can be a smart choice, especially if money is an option. Some love such an experience and use it as an excuse to get to make new friends; while others may prefer their privacy. Regardless, it can mean added (physical) security, which is always a plus. However, there is also the monthly maintenance fee, which you’ll need to factor into, on top of the monthly mortgage payment.