If it’s been a while since you last moved, 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.
How should you determine your budget?
The first step is to calculate the maximum you can spend. 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.
Of course, just because you may qualify for a large mortgage doesn’t mean
you want those bigger payments. So, the second step is to think about your
needs. What features are a must in your next home? For example, you might
want four bedrooms and anything less would be a deal-breaker.
Make a “must-have list”. That list can by 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.
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 country kitchen, etc.
Ask yourself how much you would be willing to pay for those desirable
features. $20,000? $50,000?
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.