Things to Consider When Selling Up
"KNOW YOUR FINANCES"
- Get an accurate picture of your financial situation - how much more of a mortgage payment can you comfortably afford.
- Be realistic about what you can sell your house for and what portion of the proceeds you'll have available for your next home.
- Get pre-approved for a loan, then you'll know, before you house hunt, what range to be looking in.
- There are two important factors you will want to consider when selecting a Home Loan: (A) How long you intend to own this home, and (B) whether your home is expected to increase, decrease or stay the same for the duration of time you own that home.
Your Property Taxes:
You can certainly use the amount that the seller of a home is currently paying as a guideline to determine what you will be paying in property taxes. However, remember that taxes are normally assessed upwards as each year goes by, so make certain you allow for potential increase in your long term financial calculations. You can easily find the tax amount a seller is currently paying on their Multiple Listing Agreement.
Don't forget to factor in items such as Hydro, Gas and Water into your financial painting. However, until you know the property you're going to buy, it's difficult to get an accurate picture of the cost for these utilities. You can ask the current homeowner to provide you some details of these costs, but these numbers are merely a guideline. For example, if the current owners are an older couple who travel a great deal of time, and use few utilities, their bills will not truly reflect what a typical family of four people would use year round. What you can do is use percentages as way to calculate your utility costs: For example, if you're planning on moving into a new home that is approximately 25% larger than your current home, then estimate your utility bills to be 25% higher than their current rates. Remember, if you are moving from an old home with energy inefficiencies, into a newer more efficient house, that new home may not cost you more, even though it's larger.
Maintaining Your New Home:
Even if you're not buying a "fixer-upper", you are probably going to spend more on maintenance, especially when you first move in - there's always something that we want to change. There's a general rule you can use to calculate what you "may" spend: Multiply the purchase price of your new home by 1%, or 1.30% for older homes. So if you're purchasing a newer property for $300,000, then you may want to allocate $3,000 in funds for unexpected expenses.
Your Homeowners Insurance:
If you're buying a more expensive home, there's a good chance your homeowners insurance will increase. Again, you can use the general rule of thumb that the amount will increase by the percentage calculation of the increased size. For example, if you're current home is 1500 square feet, and your homeowners insurance is $250 per year, and you're moving into a new 2500 square foot home, the percentage increase of your home is 66.7% - Therefore your allocated new homeowners insurance estimate would be $167 more per year.
When you are selling a home to buy a new home, don't forget that you'll be charged legal fees on both transactions. Your solicitor can provide you with an estimate of these costs. As well, don't forget that you will pay Land Transfer Tax on the purchase of your new home. If you would like to understand more fully how Ontario Land Transfer is calculated, visit this page.
These tips are meant as a guideline in order to help you see a more complete financial picture of what to plan for when Selling Up.
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*clip art from Wizard of Draws*
Selling Up, by Patricia Hodge Rendall