Last Updated: Friday - 09/24/2010
Week of May 15, 2006
Think and plan before you buy that house
Couples must educate themselves about homeowner financial ins and outs
By BILL GLEN
Also there are computer software programs available that tabulate "what if" scenarios based on information provided by the couple.
"You don't want to become house poor," Wedel said. "A lot changes during a couple's lives.
"What if one loses their job or gets sick?
"What if the new mother chooses to stay home for a year?
"That has an impact on the family's income."
A couple should investigate whether they can truly afford to buy the home. Because a home is a good investment, Wedel would not discourage a couple from taking this step.
But they need to consider several factors, including the possibility of major sacrifices to their lifestyle.
For a couple that has some money in RRSPs, the Government of Canada has the Home Buyers' Plan (HBP) that allows each spouse to withdraw up to $20,000 tax-free from their RRSPs, in order to build or buy their first home.
The requirement is that the amount be paid back into the retirement plan within 15 years.
An added benefit using the HBP is that when money is put into RRSPs, quite often there is a tax refund. A couple can draw from the HBP and use the refund towards the down payment.
"This has opened up the door for a lot of younger people to use this money, who have begun to put away for their future," Wedel said. "They have actually multiplied what they have to put down simply by putting it into RRSPs first and then drawing it out later for the purchase of the home."
Balance should be considered so that the couple does not sabotage its retirement savings, Wedel said. He suggests sitting down with a banker or an elder they trust.
Usually parents and in-laws have purchased a home in the past and can be counted on as sources of information. But they do not always have these tools to use in today's market.
That is one reason why Wedel teaches financial planning and financial management to an adult Sunday school class at his church in New Sarepta.
"There is wisdom in age and experience," Wedel said.
"The Church is there to minister to us spiritually, but also about how we can apply the principles to our daily living.
"That includes money management and stewardship."
Wedel says there is nothing wrong with old-fashioned values where a couple buys a smaller starter home, raises the family and then purchases the beautiful retirement home once the young ones have moved on.
"The reason they are old-fashioned values is because it's been proven they work."
A trend he is witnessing however, is the mid-20s couples walk right into the 3,000-square-foot home because their high paying jobs qualify them to do so.
"They are wonderful homes, but they put such a strain on finances. I suggest they look for a modest home in their price range and factor in the cost of the home and not just the monthly payments.
"They might consider buying a condo or a small house and build up some equity which they can use when they need to buy a larger home as the family grows," he said.
Wedel recommends that a couple talk to a financial planner and develop an integrated financial plan that looks at short and long-range goals.
He warns against falling into credit card "safety nets" and suggests avoiding "no down payment required" financing that usually carries higher interest rates.
No one has too much money that they do not need to clip coupons from a newspaper or magazine to help their budget.
In fact, Wedel says some of the wealthiest people he deals with live in their old home and still drive the old family sedan.
"They are bargain shoppers.
"Why pay $20 for something when you can pay $15 for the same item? It makes no sense."
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