Spending doesn’t end once home is purchased
Be prepared to budget for furniture, appliances, repairs even after house inspection
When Erik and Theresa Tsang bought a three-bedroom townhouse in Newmarket, Ont., back in 2012, they had already decided it wasn’t their forever home. “We didn’t want to put too much money into it,” says Tsang. “It was already in fairly decent condition and, because we were planning to have a family, we knew we wanted some place bigger.”
Those good intentions didn’t hold. “We had to buy some furniture because ours wasn’t enough to fill the space,” says Tsang. “And some of what we had didn’t fit in the rooms we’d intended for it to go.”
The price tag for furniture: about $10,000. Replacing the worn and dated stove cost another $600.
Then the air conditioning unit broke; fixing it cost $200. But the biggest expense of all was the water heater.
When it stopped working, the couple was told the piping that fed it was no longer up to code and would have to be replaced. Portions of drywall had to be removed in order to reach the pipes. There went another $1,000. “Buying a home is an expensive and stressful experience,” says Jeffrey Schwartz, executive director of the non-profit Consolidated Credit Counselling Services of Canada. “The sticker price on the home and the closing costs are just the first steps.”
In fact, a recent analysis of new homebuyers by the National Association of Home Builders in the U.S. found a home purchase typically triggers a flurry of other expenditures for appliances, furnishings and remodelling. During the first year af- ter closing, the typical buyer spends on average $5,288 on furnishings, $4,279 on renovations and $2,769 on appliances. Here’s how to make sure you don’t end up sinking under the weight of debt:
Try to calculate the long-term expenses of running the house. “Typically, when you buy a bigger house, you’ve got bigger expenses,” says Schwartz. “You have a bigger roof and furnace to replace and bigger bills for heat and hydro.” If you haven’t compiled a budget, now’s the time. You can find a basic budget sheet at consolidatedcredit.ca.
Count on “emergencies.” Tsang’s home was only 10 years old. But “even though we had a home inspector come in and look at it, they’re not going to spot things like cracks in the pipes,” he says. “You should probably have a buffer in your budget for when things go wrong.” Schwartz suggests having three to six months of living expenses in an emergency fund. Toronto real estate agent Collette Skelly says a small line of credit does the trick as well.
Put in some sweat equity. The Tsangs painted their home themselves. Skelly suggests bringing in a gang of friends to do what has to be done. “A case of beer goes a long way,” she says.
Opt for gently used. Those ads for new condos with perfectly Zen rooms aren’t realistic, says Skelly. “People don’t really live like that. They bring in furniture from their own place and from grandma and the parents’ house,” she says. Her advice: make do for a while. “You don’t want to buy a home, a condo or furniture unless you’re sure you’re going to like it for at least seven years.” You may even leave a few rooms empty. Says Schwartz: “I have tons of friends who moved into a house and didn’t have any furniture in one of the rooms.”
Prioritize the renos. “Paint it all white. Maybe get a new countertop and replace the terrible old stove and then leave the house alone for a year while you get used to those mortgage payments,” advises Skelly. That will give you time to decide on your biggest priorities, whether that’s a couple of new windows, a new floor or a countertop. “By that time, you may need a new roof,” she says.
Don’t get hung up on this year’s model. Next year, that model will be passé, points out Schwartz. “It costs money to be a first-adopter.”
Do your research. Looking for a specific item, whether a couch or a dishwasher? Educate yourself first about what features and brand you’re seeking. Check out flyers and websites and make a few phone calls to stores likely to carry it. Online price comparison websites can be a great resource too, particularly for appliances. Good Canadian sites for electronics include shopbot.ca and pricegrabber.ca.
Know when to shop. January is especially good for “white sales” on sheets and bedding, as well as TVs. Refrigerators often drop in price in May, as new models begin appearing. Home-decor prices dip in July. It’s also a good month to buy furniture as the latest designs are due to hit the showroom floor in the near future.
Ask “is that your best price?” You can’t bargain for everything, but you’d be surprised how often you get a discount when you use those five little words.