How Much Should You Budget for your Next Home? - Sherille Layton

How Much Should You Budget for your Next Home?

26 September 2019
Sherille Layton

Usually when I sit down with clients they have a sense of what they can spend on their next home.

However, if it has been a while since you last moved homes, you might be wondering how much you'll need to spend on your next home. That's an important question to answer, even if you're just at the "thinking about it" stage and haven't decided whether or not you'll look for a new property. 

After all, knowing your budget might influence your decision. And, if even if your know budget does what you’re looking for exist within that budget. Toronto real estate is a moving target, and always on the move and usually towards price increases.

I have had many clients disappointed as to what their budget can afford in this vibrant city and some have had no other option to move to the outskirts of Toronto.

Although, downsizing can also be an attractive option. Read my previous blog

How should you determine your budget?

The first step is to calculate the maximum you can spend without it affecting your lifestyle. This involves adding the money you'll get from the sale of your current property after repaying your outstanding mortgage, to any other funds you have available to invest plus the maximum amount of mortgage you qualify to receive and most importantly the amount you feel comfortably paying every month. 

I have had so many clients say the bank has approved them for so much more than they want to spend, and there is nothing wrong with that. Of course, the banks would like you to spend more.

You may qualify for a larger mortgage, however, this doesn't mean you want those heftier mortgage payments. Sometimes, I ask clients if they need all the space in the bigger home that they are interested in. As you could end up paying for a lot of space that you will not end up using.  Criteria is of the utmost importance at this stage. Interior, exterior and lifestyle needs!

What features are a must in your next home? For example, you may want four bedrooms and anything less would be a deal-breaker. Or a detached garage. Many homes in the central core of Toronto do not come with detached garages.

The second step. Make a "must-have list". That list can be used to find a baseline of properties on the market — and then find their average asking price. This will give you an idea of what it would cost to find a home that meets your must-have list.

When I have new clients in the early stages and are researching. I always send them what has sold in their preferred neighbhourhood with the criteria they require so they can get a sense of how realistic their needs and budget are. Usually there are a couple of compromises to be made.

The third step is to go beyond needs and consider the features you want. These might not be deal-breakers, but you'd sure love to have them in your next home. They could be a large deck, a location in a desirable neighbourhood, a big chefs kitchen, etc. A certain school district. 

Ask yourself how much you would be willing to pay for those desirable features. $20,000? $50,000? Or even more. Transit, schooling and amenities are often factors that are to crucial to consider.

Once you've gone through these steps, you'll have the information you need to match your needs and wants to what's available on the market — and you’ll know how much you might expect to pay for your next home.

The beginning of the “search for a new home” is a task I love to help with. Research is key. Knowledge is power and once you are armed with both an informed decision should become easier.

Feel free to contact me to get the conversation started – personally on 416 419 5893.