Many young couples are delaying their real estate dreams to start a family and saving money to ensure a good future for their children. If you are looking to be a new home owner and a new parent – do not worry: your dreams can be within reach, but you need to be willing to compromise. One of the most important things to remember is that home ownership can be an amazing investment for you and your growing family – you just need to make sure you can budget properly.
If you are pre-approved for a mortgage, the bank may say you can afford a certain amount on your new home, but it is up to you to determine what is affordable when you factor in the possibility of a new addition to your family. There are a few items to consider when calculating your new budget:
Maternity/Paternity Leave – Keep in mind that maternity leave and parental benefits pay up to only 55 per cent of a person’s income, with the maximum payout being $537 per week. Will this affect your ability to make mortgage payments if you choose a home that is near the top end of your budget?
Childcare – After the maternity/paternity leave, there will come a point where you have to consider childcare. If you are one of the lucky few who have relatives available to child-mind on a regular basis, count your blessings! Childcare in Toronto costs parents hundreds of dollars every month. Toronto is Canada’s most expensive city for childcare with monthly averages reaching $1,676 for infant care, $1,324 for toddlers and $998 for preschool aged children.
With childcare costing as much as $25,000 a year, some financial experts argue that it may not make sense for the lower-earning spouse to return to work. If one parent makes $50,000 a year ($40,000 after taxes) and you add commuting costs and other work-related expenses – you could find yourself breaking even after deducting childcare costs. Even if it does not make the most financial sense, many young parents return to the workforce in order to further their career and remain current in their field. Every family is different, only you know what is right for you and your family.
Other Expenses – Remember to factor in the money you will need to put aside for large purchases like baby furniture, car seats, strollers – you may even have to buy a more practical car. There will also be new regular expenses such as diapers, baby food/formula etc.
Work with Your True Budget
Once you know what your actual budget will be, (after factoring in new expenses) you can get a more realistic idea of what types of homes to look for. For many young couples, being approved for a $700,000+ mortgage does not necessarily mean that will be the price range they look for. They may strive to not spend more than $440,000. Striving to get the most expensive house you can afford can put you in a precarious position if unforeseen expenses arise.
Being a new home owner and starting a family can go together very well – just make sure you know what you can expect. Buying a dream home right away might not be plausible for everyone, but there are definitely options out there. Whether it is starting out by purchasing a condominium, finding a ‘starter home’ or buying slightly outside of your desired area – there are several options to make home ownership a reality! If you are interested in finding out what homes are available within your budget, call me at 416-960-9995 and I would be happy to help.
