Renting is pretty easy.  You know how much your monthly rent is, and which bills you’re responsible for.  Sure you might end up with an unusually high cell phone bill one month, but for the most part it’s going to be steady and predictable.

Home ownership, on the other hand, is full of ups and downs.  Bills can vary pretty substantially depending on the season, and tax bills don’t come at regular intervals.  Then we get to emergency repairs and maintenance, and all of a sudden you’ll be wishing for the simpler times of your renting days.

Without really knowing just what sorts of expenses you’ll face with your first home, it’s all too easy to misjudge how much you’ll need.  Make no mistake, having a “we’ll figure it out as we go” attitude is NOT the right way to go about things.

Luckily, it’s almost impossible to just go out and buy a home.  You need a substantial down-payment that you’re going to have to save for.  Here’s how you can both save for that down-payment AND prove to yourself that you can actually handle owning a home.

First, Some Math

You need to do some estimating as to how much your house will cost.  Use some of our mortgage calculators to figure out what a reasonable mortgage payment would be for the type of price-range you’re looking for.

Add to that monthly payment your utilities, which will probably be $250-$350 per month.

Property taxes are tougher to calculate without knowing what the Municipal Property Assessment Corporation (MPAC) assessed the property’s value was.  Luckily, last year’s owed taxes are usually listed on the MLS listing, so you should be able to get a good idea of what you’ll be paying in a given price range in a given area.

Now you have to estimate maintenance costs.  This depends on a number of factors, but assume $300-$500 per month.

A Specific Example

Using our assumptions from above, let’s make up an example:

Current Rent: $1,000

Mortgage Payment of new property: $1,200

Utilities: $250

Taxes: $200 (monthly average)

Maintenance: $400

New Home Monthly Cost: $2,050

Subtract your current rent of $1,000 for a total of $1,050.

That means to prove to yourself you can indeed afford a home, you have to be able to save an additional $1,050 per month.

Actually Doing It

It would be easy to tell yourself “Sure, when we need to that’ll be easy to do – we’ll just cut back on eating out a bit and be fine”.  Sorry, not good enough.  You have to save for a down payment, and you have to prove you won’t lose your house.

Set up a separate bank account specifically for down payment savings.  This account’s purpose is solely to hold down-payment money.  From now until you buy your home, put that $1,050 in every single month.  If you end up with money on top of that, great, it can go in too, but the only way to know you’ll be OK is to save that money consistently (no skipping 4 months and then dumping in a tax refund – that’s not how mortgage payments work).

This may sound a bit extreme, but there’s nothing worse than realizing your dream of owning a home is going to crush you financially.  Be prepared and know what you’re getting into so you can truly enjoy this next phase of your life.