The financial expert offers advice on budgeting for homeownership

Jennifer Wilson, Toronto Star

Home ownership is stressful business. A sometimes defeating search for the perfect space, a constant battle to keep up with myriad repairs and seemingly endless bills – mortgages, insurance, taxes, utilities, repair costs and so on – can all put a serious drain on your finances and your relationships.

Financially Fit

Proper planning can prevent your new home from feeling like a burden, says financial expert Gail Vaz-Oxlade, who helps couples take control of their finances on the HGTV show Till Debt Do Us Part. “So homeownership doesn’t come as a shock to you, figure out what it will cost to carry the new home you’re moving into . . . and practice living on this income.”

For example, if all your home-related costs, including taxes, insurance and utilities, tally $2,300 a month and you’re currently paying $1,200 in rent, Vaz-Oxlade says you should slide the difference – here, $1,100 – into a savings account to boost your down payment fund.

This is also the time to make tough choices, she says, “Do you really want a down payment on a house, or do you want to eat out three times a week?” She suggests cutting all extras, including cable and magazine subscriptions, seeking cheaper forms of entertainment and setting up an automatic withdrawal so your down payment account is automatically paid each month.

In addition to boosting your home fund, during this time you also learn to live with less disposable income.

“If you practice this for about six months, you know whether this is the life you want to live,” she says. “If it doesn’t work for you, maybe you buy a smaller house, somewhere else,” or choose not to buy at all.

While there’s a focus on homes as a way to build equity, she notes that investment accounts are another great nest egg option.

“There’s no harm in renting,” she says. “Some people are better off renting. There are some lifestyles far more conducive to renting. (If you buy), you may not be able to afford the lifestyle you want to have.”

For those who do buy, after several months practice and saving a down payment, Vaz-Oxlade says it’s important to consider your real needs.

“Don’t buy more house than you need or can enjoy,” she says, noting people can “go nuts over perfect hardwood floors, spa bathrooms, but really, it’s a home, it’s not a show house.”

These needs also include what you can afford, including building in flexibility for mortgage payments as the monthly costs will likely rise when renewed.

“If you’re buying more house than you can actually afford (or maintain), you’re an idiot,” she says bluntly.

First published in the Toronto Star on April 16, 2011.

Are you financially fit? Use this tool to find out your financial fitness score.

Achieve the homeownership dream sooner