Owning a home is a lifelong dream for many and likely the largest purchase most people will ever make. It’s also an excellent tool for building wealth!
However, like any tool, if it’s misused, it can have negative impacts.
The number one mistake that homebuyers make is moving too often!
Buying and selling too often plays into the bank’s hands, not yours when it comes to finances.
The average mortgage is 25-30 years meaning 300-360 monthly payments until you own your property outright. What many people don't realize is that banks front-load their profits on the loan, known as your mortgage's interest. The payments in your early mortgage years go primarily toward interest, with little money going toward the principal of the loan.
For example, the monthly payment on a 30-year mortgage for $200,000 at an interest rate of 5% would be $1,073.64. On that first payment, $833.33 is towards interest, and just $240.31 goes toward that $200,000 principal balance. The scale slowly tips every month, and the tables eventually turn; your monthly payments will be almost all principal and little interest by the end of your 30-year journey.
That said, the average homeowner only stays in their home for 13 years, at that time the monthly payment would be $613.94 towards interest and $459.70 towards principal. You’ve actually paid the bank more over those 13 years than you have towards your principal.
We understand that people need to move and life changes, however, when searching for your first or next home, we do suggest thinking about the long term. Will you grow your family? Are children heading off to university soon? Will you retire and downsize in a few years? There are plenty of questions you should ask yourself when searching for your next home.
Here are the most common reasons for people to move:
Move closer to family and friends
Need a larger/smaller home
Neighbourhood is changing
Want to move from a starter home to a forever home
The answer to the majority of these questions can usually be figured out before you buy a new home if you take the time to really think about your future and yourself the questions that you need to.
If you’re thinking of buying a home in the near future and would like some guidance, please don’t hesitate to reach out to us. We’d be more than happy to offer our advice and some tips on how to find the right home for you, and for the future!