June 2022 – Ryan Boyle, CRPC®
Whether you’re in the market for your first home, getting ready to move into your dream home, or just casually browsing the current housing market, being prepared for such a large transition is the best way to combat any fears you may encounter during your closing process. To help prepare, we have a few tips to consider before purchasing a property.
Consider the cost of the home and its overall impact on your cash flows. Depending on your financing, it’s critical to review your current cash flows to ensure your home matches your budget as much as it matches your interest. For those who can make a full cash offer, you may want to review to see if paying for the house in full would be a good use for your funds by comparing the interest rates on a mortgage versus the returns you are receiving with your current investments. This also would be a great time to review your homeowner’s insurance policies, as you may need to increase or decrease your coverage levels depending on the house being purchased, which could impact the premiums you pay. Let’s not forget the fun part of your path to buying a new home: the renovations. It may be best to either set aside a budget or incorporate your renovation costs into your new purchase, as these can sometimes require a larger amount of funds to be readily available in a shorter period of time.
Revisit your emergency fund: Now that you have something in your sights and your financing is set, it’s time to ensure your emergency savings are appropriate, and begin to modify your savings plan accordingly. As a rule of thumb, it’s best to always keep anywhere from 3-6 months of non-discretionary spending set aside in cash reserves in the event of a catastrophe, depending on the number of income streams your household currently has. Adding mortgage payments into your current cash flow needs can cause some to have to increase their emergency savings levels. On the other hand, if you are downsizing homes or can see your expenses going down as a result of your new purchase, it may be time to put some of your emergency savings to work either in your new home or have it earn more than it could when it was sitting in cash.
At the end of the day, we’re here to help our clients navigate through what some could consider extremely stressful times. We can consider your potential home purchase when building out your financial plan, review the overall impact on your cash flows, and analyze the financing options you have available to you, allowing you to make an informed decision when making this large purchase.
This material is for informational purposes only. It is not a recommendation or solicitation to buy or sell any securities. Vantage Financial is not a tax advisor; please consult your tax advisor prior to making any investment decisions. Vantage Financial is an Investment Advisory Firm registered with the Securities and Exchange Commission (“SEC”). SEC registration does not imply any particular level of skill or expertise.