Your first monthly mortgage payment is due at the end of the month after you close. It sounds simple to prepare for the costs of home ownership. It’s just a mortgage payment, right? Well, “Payment Shock” is an oft-used industry term for a reason. The mental and financial strain of home ownership can be surprising.
Your down payment, legal fees, land transfer taxes (if applicable) and a number of other costs deplete your savings. Then there are moving expenses, painting and repairs. These chip away at your bank account (and your sanity), especially if you’ve purchased near the high-end of your budget. What seemed like a comfortable buffer can be spent pretty quickly.
HOW TO WEAR RUBBER SOLES WHEN PAYMENT SHOCK HITS
Make sure that you have the funds in the account before the due day. We have seen situations where a client was overwhelmed and neglected to deposit a cheque that caused their first payment to bounce.
Plan out your big expenditures for the year. Especially property taxes.
DON’T TAKE ON NEW DEBT IF YOU CAN AVOID IT
Give your mortgage payments time to become just another bill. That extra $ a month will start to bite in a few months. Save your vacation for when it isn’t biting so hard.
FIGHT THE FOMO!
The best thing you can do to avoid payment shock is to avoid it altogether by buying at the low to medium-end of your budget. Finding the perfect home is everyone’s dream, but winning a bidding war isn’t worth losing a debt war and worrying about interest rates and home values for the next five years.