Source: CMHC Canada Mortgage and Housing Corporation
Home Buying Step by Step – Step 5
Now that you’re a home owner
Your Financial Responsibility
Make Your Mortgage Payments on Time
You can make your mortgage payments monthly, biweekly or weekly. But, whichever timetable you’ve chosen, it’s important to always make payments on time. Making late payments is called delinquency. Delinquency may result in late charges and negatively affect your credit rating. Failing to make payments can even lead to very serious consequences, like foreclosure.
A good way to prevent late payments is to have the amount automatically deducted from your account every month. It’s also recommended that you keep at least three months’ worth of mortgage payments in savings for emergency situations. If you are having trouble making payments, discuss the situation with your lender.
Plan for the Costs of Operating a Home
Besides your mortgage, property taxes and insurance, operating a home has many other ongoing costs. Maintenance and repair costs are at the top of the list. There may be other costs as well, for example a security alarm, snow removal, or gardening. If you have a condominium or strata, some of these expenses may be included as part of your monthly maintenance fee.
Save for Emergencies
Even when you can do repairs yourself, there are costs. When you have to pay for repairs, the costs are higher. As your home ages, it will need major repairs or replacement — this happens to every building. For example, when you bought your home, you might already know that the roof will need to be replaced in a few years because of its age. These are expected repairs and can be planned for. However, many repairs are unexpected, and can sometimes be costly.
Set aside an emergency fund to deal with unexpected problems ranging from major repairs to illness and job loss. A good guideline is to save 5% of your take-home pay, and to keep the money in a special account.
Live Within Your Budget
Prepare a monthly budget and stick to it. Take a few minutes every month to check your spending and see if you are meeting your financial goals. If you spend more than you earn, you must find new ways to save. If you are having trouble sticking to your budget, ask a professional money manager for help.
If you haven’t already reviewed your budget, now is the perfect time. Use the helpful CMHC worksheet Household Budget as Homeowner.
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